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For those of you confused as to how these companies are running at all given that they have never turned a profit the answer is: 1 - they pretty much all raise

For those of you confused as to how these companies are running at all given that they have never turned a profit the answer is: 1 - they pretty much all raised a ton of capital by going public, 2 - they have all taken on significant amounts of debt. This was previously considered a good move because of low interest rates. 3 - some of these companies actually could be profitable, but only if they cut expenses, I.e. Layoff overpaid employees. Now to be clear, some of these companies are hopelessly screwed.

lmarcos 4y ago
> Now to be clear, some of these companies are hopelessly screwed. I'm not sure about that. I imagine that for the founders and top executives of these "loser" companies, they are having the time of their lives: Earning top money fast without doing too much. So, from their point of view, the company is doing fine. Now, sure, employees are always screwed no matter what ;)
z9znz 4y ago
There is a big distance between the unmentioned 0 and your 1. 0.1 - 0.999 - they raised round after round of VC, paying back the previous round with big profits. 1 - they sold the gullible public (which never should have happened - regulators should have prevented the IPO!) on a business model with no real hope of profit.
- biggoodwolf 4y ago
  Gullible indeed, all those ETFs investing by default in these? Check.
  - z9znz 4y ago
    ETFs investing in utterly non-profitable companies does not make it valid. The reason ETFs are putting money in riskier and riskier places is that there is too much money concentrated in a few places, and there are rules as to what % of their investments can be put into one investment.
- s1artibartfast 4y ago
  Regulators should just be there to ensure the financial statements are accurate, not that a company is a guaranteed safe bet.
  - z9znz 4y ago
    There was a time not so long ago when you could never get an ICO to happen if you were not profitable for several years beforehand. Keep in mind that regulation has been relaxed significantly each decade for a long time. There is a political party which exists almost entirely to eliminate regulation, and they boast about it. One would be led to believe that regulation was what was holding us all back from living full lives.
    - s1artibartfast 4y ago
      I'm normally pretty sympathetic to all those positions you disagree with. I think that the state regulation, control, bailouts, and corruption are holding us back. You can have the state pick winners and bail out idiot investors when they lose their shirt. I would rather make individuals and companies responsible for their own good or bad bets. For me, part of that means letting people place their bets with minimal state intervention and guarantees about the bet.
      - WeylandYutani 4y ago
        Social stability needs to be maintained by government even if that means everyone's getting a bail out. When a million people lose their savings it is EVERYONE'S problem. See Roosevelt's New Deal that saved the country (and got America in shape to fight WW2).
      - z9znz 4y ago
        > bailouts In 2008, the bailouts were for the banks and institutions. They did nothing for the people who had already been screwed. Finance and wealthy interest control US policies. By a large margin, the public welfare is funneled upward to a minority with the power to direct and focus lobbying. The individuals on the ground get far less. A free market allows some groups to become so powerful that they can exert forces which prevent competition. Then the free market ceases to exist, and the monopolies take control. Whether this is corporations in an industry or wealthy groups in a population, it is the same. > letting people place their bets with minimal state intervention What is the value of this freedom when all the bets are placed with "institutions" which will rob (/cheat) the investor? Any rock you turn over, you will see preference given to people of power or wealth. The accredited financial institutions have been publicly shown to favor insiders or themselves, for example. Retail investors would be advised to invest in things that the institutions knew were bad by the firms they trusted in and paid for advice to. There is virtually no fairness or mathema†ical equality afforded to everyone in the current systems of government. To believe otherwise is fantasy. If one is in the right group, they have a marked advantage. For the rest, they are almost assured to get much lower results from their efforts.
KoftaBob 4y ago
In the case of rideshare/delivery companies on the list like Uber, Lyft, and Doordash, the bulk of their expenses/losses aren't salaries, it's in subsidizing every ride/delivery to compete on price while still compensating drivers enough for it to be worth it to them. In other words, Uber didn't burn $30B on salaries, it burned it selling $1 bills for $0.70 over and over and over again.
- treis 4y ago
  This is just not true. Uber and Lyft definitely sell rides for more than they pay out to the driver. Lyft, as an example, has 3.9 billion in revenue against COGS of 2.2 billion.
  - KptMarchewa 4y ago
    They hide that expenses in marketing.
    - woeirua 4y ago
      Not if they don't want to go to jail for fraud. These are publicly traded companies.
      - kasey_junk 4y ago
        It’s not “hidden” in that it’s not on their financial statements. It’s that churn of drivers and adding of passengers is accounted for in their marketing budget so if you want to do a fair comparison of cost per ride you need to figure out how to break out that component. It’s no different than any other companies marketing budget and is definitely not fraud.
motohagiography 4y ago
Given their debt levels, could some of these companies may take down financial companies with them though? If these (and other unicorn companies) secured what could be some several billions of dollars in low interest debt with their stock as collateral, that means those loans have been securitized, resold, and leveraged again into the market using other derivatives. It also means that the interest rates hikes coming from the Fed may cause those companies to sell more stock to make their interest payments - which will drive their stock down, knocking the collateral out from under the loan, with a bazillion or so in derivatives hinging on it. Totally hypothetical though. I am sure they have it under control. It does sound like unicornageddon if interest rates jump though. The 2008-billion dollar question would be, who is holding the derivatives on those loans? It's probably different this time, it's not like 2008 could happen again, and we learned from history so much so that Margot Robbie in a bathtub explained it to us. The US could probably afford another bailout if it came to it, and it's not like the conseqeunt inflation would trigger rapid de-dollarization of the global economy as big national holders dumped their reserves and created huge bubbles in anything that facilitated capital flight out of USD - like oil, fertilizer, and other necessary things to keep whole continents of people from starving. Co-operation would need to persist instead of nations turning inward to solve their own problems and fend off internal strife, instead of co-ordinating a response. This is fine.

lmarcos 4y ago

> Now to be clear, some of these companies are hopelessly screwed. I'm not sure about that. I imagine that for the founders and top executives of these "loser" companies, they are having the time of their lives: Earning top money fast without doing too much. So, from their point of view, the company is doing fine. Now, sure, employees are always screwed no matter what ;)

z9znz 4y ago

There is a big distance between the unmentioned 0 and your 1. 0.1 - 0.999 - they raised round after round of VC, paying back the previous round with big profits. 1 - they sold the gullible public (which never should have happened - regulators should have prevented the IPO!) on a business model with no real hope of profit.

biggoodwolf 4y ago
Gullible indeed, all those ETFs investing by default in these? Check.
- z9znz 4y ago
  ETFs investing in utterly non-profitable companies does not make it valid. The reason ETFs are putting money in riskier and riskier places is that there is too much money concentrated in a few places, and there are rules as to what % of their investments can be put into one investment.
s1artibartfast 4y ago
Regulators should just be there to ensure the financial statements are accurate, not that a company is a guaranteed safe bet.
- z9znz 4y ago
  There was a time not so long ago when you could never get an ICO to happen if you were not profitable for several years beforehand. Keep in mind that regulation has been relaxed significantly each decade for a long time. There is a political party which exists almost entirely to eliminate regulation, and they boast about it. One would be led to believe that regulation was what was holding us all back from living full lives.
  - s1artibartfast 4y ago
    I'm normally pretty sympathetic to all those positions you disagree with. I think that the state regulation, control, bailouts, and corruption are holding us back. You can have the state pick winners and bail out idiot investors when they lose their shirt. I would rather make individuals and companies responsible for their own good or bad bets. For me, part of that means letting people place their bets with minimal state intervention and guarantees about the bet.
    - WeylandYutani 4y ago
      Social stability needs to be maintained by government even if that means everyone's getting a bail out. When a million people lose their savings it is EVERYONE'S problem. See Roosevelt's New Deal that saved the country (and got America in shape to fight WW2).
    - z9znz 4y ago
      > bailouts In 2008, the bailouts were for the banks and institutions. They did nothing for the people who had already been screwed. Finance and wealthy interest control US policies. By a large margin, the public welfare is funneled upward to a minority with the power to direct and focus lobbying. The individuals on the ground get far less. A free market allows some groups to become so powerful that they can exert forces which prevent competition. Then the free market ceases to exist, and the monopolies take control. Whether this is corporations in an industry or wealthy groups in a population, it is the same. > letting people place their bets with minimal state intervention What is the value of this freedom when all the bets are placed with "institutions" which will rob (/cheat) the investor? Any rock you turn over, you will see preference given to people of power or wealth. The accredited financial institutions have been publicly shown to favor insiders or themselves, for example. Retail investors would be advised to invest in things that the institutions knew were bad by the firms they trusted in and paid for advice to. There is virtually no fairness or mathema†ical equality afforded to everyone in the current systems of government. To believe otherwise is fantasy. If one is in the right group, they have a marked advantage. For the rest, they are almost assured to get much lower results from their efforts.

KoftaBob 4y ago

In the case of rideshare/delivery companies on the list like Uber, Lyft, and Doordash, the bulk of their expenses/losses aren't salaries, it's in subsidizing every ride/delivery to compete on price while still compensating drivers enough for it to be worth it to them. In other words, Uber didn't burn $30B on salaries, it burned it selling $1 bills for $0.70 over and over and over again.

treis 4y ago
This is just not true. Uber and Lyft definitely sell rides for more than they pay out to the driver. Lyft, as an example, has 3.9 billion in revenue against COGS of 2.2 billion.
- KptMarchewa 4y ago
  They hide that expenses in marketing.
  - woeirua 4y ago
    Not if they don't want to go to jail for fraud. These are publicly traded companies.
    - kasey_junk 4y ago
      It’s not “hidden” in that it’s not on their financial statements. It’s that churn of drivers and adding of passengers is accounted for in their marketing budget so if you want to do a fair comparison of cost per ride you need to figure out how to break out that component. It’s no different than any other companies marketing budget and is definitely not fraud.

motohagiography 4y ago

Given their debt levels, could some of these companies may take down financial companies with them though? If these (and other unicorn companies) secured what could be some several billions of dollars in low interest debt with their stock as collateral, that means those loans have been securitized, resold, and leveraged again into the market using other derivatives. It also means that the interest rates hikes coming from the Fed may cause those companies to sell more stock to make their interest payments - which will drive their stock down, knocking the collateral out from under the loan, with a bazillion or so in derivatives hinging on it. Totally hypothetical though. I am sure they have it under control. It does sound like unicornageddon if interest rates jump though. The 2008-billion dollar question would be, who is holding the derivatives on those loans? It's probably different this time, it's not like 2008 could happen again, and we learned from history so much so that Margot Robbie in a bathtub explained it to us. The US could probably afford another bailout if it came to it, and it's not like the conseqeunt inflation would trigger rapid de-dollarization of the global economy as big national holders dumped their reserves and created huge bubbles in anything that facilitated capital flight out of USD - like oil, fertilizer, and other necessary things to keep whole continents of people from starving. Co-operation would need to persist instead of nations turning inward to solve their own problems and fend off internal strife, instead of co-ordinating a response. This is fine.