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While I agree with your general sentiment, I should caution that every S-1 (as well as 10-K) contains such horrifying language; if not regarding the firm’s pres

While I agree with your general sentiment, I should caution that every S-1 (as well as 10-K) contains such horrifying language; if not regarding the firm’s present losses, then regarding the many ways the firm could begin losing money and/or value. The entire purpose of these statements, and the sections in which they reside, is to provide appropriate cover for the firm when potentially desperate investors begin to think about legal action against the company. This way, the business can point to their compliance with their legal obligation to disclose potential deleterious outcomes as well as to the fact that the equity holder was aware of any associated risks at the time of their investment.

unishark 6y ago
Indeed the precise wording itself is basically boilerplate that one sees all the time with startups. Though such language and sections aren't solely about cynical "legal CYA", but valuable warnings to investors. I would not want to take money from investors who think they are getting a sure thing, only from people who understand the risks.
nmfisher 6y ago
Well, yes and no. Every disclosure document says something along the lines of "profits aren't guaranteed". But not every disclosure document says "we've lost shitloads of money and haven't made a profit". I'm not sure where along the line IPOs changed from "profitable company raises money from the public" to "private investors parachute out and dump their losses on Joe Schmuck".
- daniellarusso 6y ago
  Mark Cuban can probably tell you.
- airstrike 6y ago
  That's quite a lot of hyperbole... Private investors "parachute out" only 20% of their stake in an IPO to investors who willingly buy into the story because they believe (rightly or wrongly) in the upside. It's not exactly like Joe Schmuck is unwillingly forced to hold on a hot potato
  - nmfisher 6y ago
    Sure, that was 100% facetious. And I agree that Joe Schmuck is buying with eyes wide open. But the underlying point is that the markets are disconnected from reality, and - fair play to them - the VCs are capitalizing on it. One day I'll actually set aside a few hours to go through a list of all tech companies that IPO'd in the last 5 years, and see which ones have actually made a profit. Gut feeling is that the "flashy" ones are still burning through cash reserves (Asana/Slack/Uber), but the more boring ones (Rackspace/Pivotal/etc) are probably sitting pretty.
    - rajuvegesna 6y ago
      > One day I'll actually set aside a few hours to go through a list of all tech companies that IPO'd in the last 5 years, and see which ones have actually made a profit. Gut feeling is that the "flashy" ones are still burning through cash reserves (Asana/Slack/Uber), but the more boring ones (Rackspace/Pivotal/etc) are probably sitting pretty. You might find site helpful. https://postipononprofits.com/ https://postipononprofits.com/ This is outdated a bit in terms of numbers (doesn’t include recent years and excludes many companies), but the broad point remains. You are right, there are ton of companies built around the idea of dumping it on someone else before turning a profit. This has become the ‘formula’ for building companies, unfortunately.

unishark 6y ago

Indeed the precise wording itself is basically boilerplate that one sees all the time with startups. Though such language and sections aren't solely about cynical "legal CYA", but valuable warnings to investors. I would not want to take money from investors who think they are getting a sure thing, only from people who understand the risks.

nmfisher 6y ago

Well, yes and no. Every disclosure document says something along the lines of "profits aren't guaranteed". But not every disclosure document says "we've lost shitloads of money and haven't made a profit". I'm not sure where along the line IPOs changed from "profitable company raises money from the public" to "private investors parachute out and dump their losses on Joe Schmuck".

daniellarusso 6y ago
Mark Cuban can probably tell you.
airstrike 6y ago
That's quite a lot of hyperbole... Private investors "parachute out" only 20% of their stake in an IPO to investors who willingly buy into the story because they believe (rightly or wrongly) in the upside. It's not exactly like Joe Schmuck is unwillingly forced to hold on a hot potato
- nmfisher 6y ago
  Sure, that was 100% facetious. And I agree that Joe Schmuck is buying with eyes wide open. But the underlying point is that the markets are disconnected from reality, and - fair play to them - the VCs are capitalizing on it. One day I'll actually set aside a few hours to go through a list of all tech companies that IPO'd in the last 5 years, and see which ones have actually made a profit. Gut feeling is that the "flashy" ones are still burning through cash reserves (Asana/Slack/Uber), but the more boring ones (Rackspace/Pivotal/etc) are probably sitting pretty.
  - rajuvegesna 6y ago
    > One day I'll actually set aside a few hours to go through a list of all tech companies that IPO'd in the last 5 years, and see which ones have actually made a profit. Gut feeling is that the "flashy" ones are still burning through cash reserves (Asana/Slack/Uber), but the more boring ones (Rackspace/Pivotal/etc) are probably sitting pretty. You might find site helpful. https://postipononprofits.com/ https://postipononprofits.com/ This is outdated a bit in terms of numbers (doesn’t include recent years and excludes many companies), but the broad point remains. You are right, there are ton of companies built around the idea of dumping it on someone else before turning a profit. This has become the ‘formula’ for building companies, unfortunately.