4 ms·

Profitability doubts after the IPO? Everyone in the world knew they were never close to profitability pre-IPO, this is just the reality of being a publicly tra

by ProAm 7y ago

Profitability doubts after the IPO? Everyone in the world knew they were never close to profitability pre-IPO, this is just the reality of being a publicly traded not profitable company. Can't funding round yourself out of this one anymore.

rolltiide 7y ago
Well you can... the terminology is just different They’ll say “saudi investors bought into secondary offering at X share price” instead of “round completed at Y valuation!!!” Which is just X share price of last purchase multiplied by total shares in existence Public companies can do secondary offerings from treasury or from creating brand new shares from nothing (dilution) Liquidity is one of the benefits
- mdorazio 7y ago
  Yup, also from selling bonds.
  - bduerst 7y ago
    Raising debt is just as visible on public filings as burning the cash, and gets baked into the market price. It's also hard to do with as few of assets as Uber has.
    - rolltiide 7y ago
      The market price of shares is less consequential than you think, for an issuer.
- bduerst 7y ago
  But then what's the planned payout for those secondary investors? Liquidating on the market would plummet.
  - H8crilA 7y ago
    Companies do this all the time (issue new bonds or equity). There's really not much of a difference between public and private markets, in principle. Planned payout is, and has been the same ever since limited liability companies were invented by humanity: excessive cash flows plus liquidation value of corporate assets at end of life. Hoping on anything else is speculation (nothing wrong with that, but it is just speculation, i.e. trying to sell to the greater fool).
    - bduerst 7y ago
      Right, but that specific activity is all visible on the financial filings, so how is that the same as the pre-IPO funding rounds that Uber was burning through? If you take out a ton of debt while burning through cash reserves then your market price plummets. Same with issuing new equity, through dilution. At least pre-IPO, the investors could lock in favorable pay outs on their funding rounds - now this is all visible to the public investors.
- askl56 7y ago
  > “saudi investors bought into secondary offering at X share price” I think Beyond Meat are currently demonstrating the perils of doing a secondary offering whilst the company is unprofitable.
  - rolltiide 7y ago
    so that was hilariously well timed with my post but very strange: its some investors doing the share sells, but having the company announce it (and selling just a tiny amount of shares in it too). The company doesn't make the bulk of the money here, so why announce it at all? The investors just used the company to advertise that they have shares to sell so this is more of a hilarious red flag of incompetence, if one planned to add to a position in this but it does the prove the point that the company and shareholders have many financing options: the issuer is unscathed here, they will create shares and exchange it for $50,000,000 or maybe $40,000,000 due to the 20% drop from announcing it, oh no. Those private shareholders are still planning to make 9 figures.

by ProAm 7y ago

rolltiide 7y ago

Well you can... the terminology is just different They’ll say “saudi investors bought into secondary offering at X share price” instead of “round completed at Y valuation!!!” Which is just X share price of last purchase multiplied by total shares in existence Public companies can do secondary offerings from treasury or from creating brand new shares from nothing (dilution) Liquidity is one of the benefits

mdorazio 7y ago
Yup, also from selling bonds.
- bduerst 7y ago
  Raising debt is just as visible on public filings as burning the cash, and gets baked into the market price. It's also hard to do with as few of assets as Uber has.
  - rolltiide 7y ago
    The market price of shares is less consequential than you think, for an issuer.
bduerst 7y ago
But then what's the planned payout for those secondary investors? Liquidating on the market would plummet.
- H8crilA 7y ago
  Companies do this all the time (issue new bonds or equity). There's really not much of a difference between public and private markets, in principle. Planned payout is, and has been the same ever since limited liability companies were invented by humanity: excessive cash flows plus liquidation value of corporate assets at end of life. Hoping on anything else is speculation (nothing wrong with that, but it is just speculation, i.e. trying to sell to the greater fool).
  - bduerst 7y ago
    Right, but that specific activity is all visible on the financial filings, so how is that the same as the pre-IPO funding rounds that Uber was burning through? If you take out a ton of debt while burning through cash reserves then your market price plummets. Same with issuing new equity, through dilution. At least pre-IPO, the investors could lock in favorable pay outs on their funding rounds - now this is all visible to the public investors.
askl56 7y ago
> “saudi investors bought into secondary offering at X share price” I think Beyond Meat are currently demonstrating the perils of doing a secondary offering whilst the company is unprofitable.
- rolltiide 7y ago
  so that was hilariously well timed with my post but very strange: its some investors doing the share sells, but having the company announce it (and selling just a tiny amount of shares in it too). The company doesn't make the bulk of the money here, so why announce it at all? The investors just used the company to advertise that they have shares to sell so this is more of a hilarious red flag of incompetence, if one planned to add to a position in this but it does the prove the point that the company and shareholders have many financing options: the issuer is unscathed here, they will create shares and exchange it for $50,000,000 or maybe $40,000,000 due to the 20% drop from announcing it, oh no. Those private shareholders are still planning to make 9 figures.