6 ms·

So rather than $8 a share they get zero? Sounds like the board was the one that messed things up.

by linotype 2y ago

eightman 2y ago
I assume the value of the remaining assets are worth more than $8/share and she was trying to get them for a discount.
- merb 2y ago
  Shares are only worth what somebody wants to pay for them. Selling a ton of shares also often devalues them. Since the company was losing money, it was clear that the shares would drop.
  - canucker2016 2y ago
    Bloomberg's Matt Levine on the 23andMe situation: https://archive.is/zXqnB https://archive.is/zXqnB
    - merb 2y ago
      Yeah but he mostly analyzes his he relationship between the board and the ceo. Of course 8 usd was not so good at the time, but the stock was falling rapidly and everybody shorted the shit out of the company, even if the ceo would’ve sold its shares under no circumstances would they have gotten over 10 usd besides that the stock was higher
  - dtech 2y ago
    That's not true, shares are a share of the companies assets and future dividends. There are "scavengers" out there who buy a company if its assets are worth more than the market cap, close down the company or otherwise spin out the assets, and thus earn more than they paid for the shares.
    - marcus_holmes 2y ago
      > That's not true, shares are a share of the companies assets and future dividends. Possibly true 20 or 30 years ago, but now shares are speculative assets, their worth determined by what the market thinks they might be bought for by a greater fool.
      - londons_explore 2y ago
        Only for companies who are profitable or might be profitable in the future. If the company has no chance at future profit, it becomes a simple share of assets. There are plenty of companies with assets only and no revenue or employees.
        n4r9 2y ago
        Are assets not also worth "what somebody wants to pay for them"?
        marcus_holmes 2y ago
        There are tons of examples of unprofitable companies, with no visible prospect of ever becoming profitable, trading at increasingly-higher values. Every tech bubble has their share of these.
        merb 2y ago
        yeah but 23andme was already falling when she wanted to buy the shares. It was overvalued and people already lost trust at the site.
      - addicted 2y ago
        If that’s the case then the likelihood of the remaining net assets being worth more than $8/share are even lower.
    - deleted 2y ago
      [deleted]
- paulddraper 2y ago
  I can’t 100% say you are wrong but I can 99% say you are wrong.
pyrale 2y ago
Just because your batna is shit doesn’t mean you should sign everything.
nextts 2y ago
What does $8/share value the company at?
cloudbonsai 2y ago
> So rather than $8 a share they get zero? Sounds like the board was the one that messed things up. The share was trading at $8-$9 at the time. The primary reason why the board has been rejecting the offer is that the CEO kept proposing discount prices to the market rate.
- messe 2y ago
  By the sounds of it, the board is about to find out what the market rate really is.
  - eightman 2y ago
    I mean if it was trading at $8/share isn't the market rate $8/share?
    - piyuv 2y ago
      Liquidity matters
      - ZeroTalent 2y ago
        This. The same thing is happening with Tesla stock. Since it's such a bit part of the S&P500, so half of retail investors buy it in their basket of portfolios and 401ks at trades at 10x it's worth on paper by looking at fundamentals.
        lotsofpulp 2y ago
        That reasoning would lead to concluding all the businesses in SP500 are traded at 10x their worth on paper. Or at least all the ones with market caps greater than Tesla. Edit, since I hit posting limit. To pooper: > Since it's such a big part of the S&P500 The conclusion is based on that premise, so any other business that satisfies that premise should also lead to the same conclusion. To llm: > I think their point is that businesses at the top of the S&P500 are traded at sentiment and momentum based values that are pretty disconnected from a logical P/E I have read the same about other businesses many times. There is nothing logical about only using P/E as a factor in determining price (or “worth”). No one knows the future, so even a price derived from an arbitrary standard of P/E is a “sentiment and momentum based” value.
phire 2y ago
Not zero; In all bankruptcies, the shareholders get whatever is left over after liquidating all company assets and paying back all creditors. In most high-profile bankruptcies, there aren't enough assets to even finish paying creditors, yet alone creditors. However, this is a voluntary Bankruptcy, so there might actually be assets left over to pay out to shareholders.
- addicted 2y ago
  Which is still gonna be significantly worse than the $8/share offered. If the value of assets after paying off debtors is > $8/share, then that’s the easiest arbitrage opportunity considering it’s currently trading at $1.80. Just buy the whole thing for $3/share (an irrefutable premium of 67%), shut down operations entirely, pay off the creditors, and pocket the net assets of > $8/share and more than double your money almost instantly. If the claim is the CEO ran it into the ground then the board messed up even worse by not replacing the CEO.
  - lazide 2y ago
    For this reason I’ve never heard of a stock which is selling at less than assets minus debts for very long. It’s an easy hostile takeover + fire sale situation. So I’m doubting that is what is really happening here?
    - manquer 2y ago
      It does happen for many reasons and not uncommon, uncertainty and risk is typically why. There isn’t one single value, value derived ( let alone perceived) is subjective In this case, The stock is worth more(or less) to the 49% shareholder than others who are may value the founder holding defacto controlling stake negatively, thus discount the stock less than its book value . This is also why sometimes same class of shares held by different people get priced (i.e. valued) differently in a single deal. Recently the paramount one is a good example . Another famous example Yahoo was valued negatively for a long time before its sale to Verizon, I.e. its market cap was less than the value of its alibaba holdings . One off events like county cases , drug trials likelyhood of a merger approval from regulators are hard to price accurately and can skew.
shreyshnaccount 2y ago
board probably thinks the assets remaining after the bankruptcy pays off the creditors is more than the $8/share?
danesparza 2y ago
If they declare bankruptcy, then the creditors get first pick over assets. Several board members might be creditors.
- FuriouslyAdrift 2y ago
  This right here... finance 101

So rather than $8 a share they get zero? Sounds like the board was the one that messed things up.

eightman 2y ago

I assume the value of the remaining assets are worth more than $8/share and she was trying to get them for a discount.

merb 2y ago
Shares are only worth what somebody wants to pay for them. Selling a ton of shares also often devalues them. Since the company was losing money, it was clear that the shares would drop.
- canucker2016 2y ago
  Bloomberg's Matt Levine on the 23andMe situation: https://archive.is/zXqnB https://archive.is/zXqnB
  - merb 2y ago
    Yeah but he mostly analyzes his he relationship between the board and the ceo. Of course 8 usd was not so good at the time, but the stock was falling rapidly and everybody shorted the shit out of the company, even if the ceo would’ve sold its shares under no circumstances would they have gotten over 10 usd besides that the stock was higher
- dtech 2y ago
  That's not true, shares are a share of the companies assets and future dividends. There are "scavengers" out there who buy a company if its assets are worth more than the market cap, close down the company or otherwise spin out the assets, and thus earn more than they paid for the shares.
  - marcus_holmes 2y ago
    > That's not true, shares are a share of the companies assets and future dividends. Possibly true 20 or 30 years ago, but now shares are speculative assets, their worth determined by what the market thinks they might be bought for by a greater fool.
    - londons_explore 2y ago
      Only for companies who are profitable or might be profitable in the future. If the company has no chance at future profit, it becomes a simple share of assets. There are plenty of companies with assets only and no revenue or employees.
      - n4r9 2y ago
        Are assets not also worth "what somebody wants to pay for them"?
      - marcus_holmes 2y ago
        There are tons of examples of unprofitable companies, with no visible prospect of ever becoming profitable, trading at increasingly-higher values. Every tech bubble has their share of these.
        merb 2y ago
        yeah but 23andme was already falling when she wanted to buy the shares. It was overvalued and people already lost trust at the site.
    - addicted 2y ago
      If that’s the case then the likelihood of the remaining net assets being worth more than $8/share are even lower.
  - deleted 2y ago
    [deleted]
paulddraper 2y ago
I can’t 100% say you are wrong but I can 99% say you are wrong.

pyrale 2y ago

Just because your batna is shit doesn’t mean you should sign everything.

nextts 2y ago

What does $8/share value the company at?

cloudbonsai 2y ago

> So rather than $8 a share they get zero? Sounds like the board was the one that messed things up. The share was trading at $8-$9 at the time. The primary reason why the board has been rejecting the offer is that the CEO kept proposing discount prices to the market rate.

messe 2y ago
By the sounds of it, the board is about to find out what the market rate really is.
- eightman 2y ago
  I mean if it was trading at $8/share isn't the market rate $8/share?
  - piyuv 2y ago
    Liquidity matters
    - ZeroTalent 2y ago
      This. The same thing is happening with Tesla stock. Since it's such a bit part of the S&P500, so half of retail investors buy it in their basket of portfolios and 401ks at trades at 10x it's worth on paper by looking at fundamentals.
      - lotsofpulp 2y ago
        That reasoning would lead to concluding all the businesses in SP500 are traded at 10x their worth on paper. Or at least all the ones with market caps greater than Tesla. Edit, since I hit posting limit. To pooper: > Since it's such a big part of the S&P500 The conclusion is based on that premise, so any other business that satisfies that premise should also lead to the same conclusion. To llm: > I think their point is that businesses at the top of the S&P500 are traded at sentiment and momentum based values that are pretty disconnected from a logical P/E I have read the same about other businesses many times. There is nothing logical about only using P/E as a factor in determining price (or “worth”). No one knows the future, so even a price derived from an arbitrary standard of P/E is a “sentiment and momentum based” value.

phire 2y ago

Not zero; In all bankruptcies, the shareholders get whatever is left over after liquidating all company assets and paying back all creditors. In most high-profile bankruptcies, there aren't enough assets to even finish paying creditors, yet alone creditors. However, this is a voluntary Bankruptcy, so there might actually be assets left over to pay out to shareholders.

addicted 2y ago
Which is still gonna be significantly worse than the $8/share offered. If the value of assets after paying off debtors is > $8/share, then that’s the easiest arbitrage opportunity considering it’s currently trading at $1.80. Just buy the whole thing for $3/share (an irrefutable premium of 67%), shut down operations entirely, pay off the creditors, and pocket the net assets of > $8/share and more than double your money almost instantly. If the claim is the CEO ran it into the ground then the board messed up even worse by not replacing the CEO.
- lazide 2y ago
  For this reason I’ve never heard of a stock which is selling at less than assets minus debts for very long. It’s an easy hostile takeover + fire sale situation. So I’m doubting that is what is really happening here?
  - manquer 2y ago
    It does happen for many reasons and not uncommon, uncertainty and risk is typically why. There isn’t one single value, value derived ( let alone perceived) is subjective In this case, The stock is worth more(or less) to the 49% shareholder than others who are may value the founder holding defacto controlling stake negatively, thus discount the stock less than its book value . This is also why sometimes same class of shares held by different people get priced (i.e. valued) differently in a single deal. Recently the paramount one is a good example . Another famous example Yahoo was valued negatively for a long time before its sale to Verizon, I.e. its market cap was less than the value of its alibaba holdings . One off events like county cases , drug trials likelyhood of a merger approval from regulators are hard to price accurately and can skew.

shreyshnaccount 2y ago

board probably thinks the assets remaining after the bankruptcy pays off the creditors is more than the $8/share?

danesparza 2y ago

If they declare bankruptcy, then the creditors get first pick over assets. Several board members might be creditors.

FuriouslyAdrift 2y ago
This right here... finance 101