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What I do not understand is: what does an 'investor' expects 'injecting' 110 million dollars on a bankrupt business? There is nothing livingsocial can do to re

What I do not understand is: what does an 'investor' expects 'injecting' 110 million dollars on a bankrupt business? There is nothing livingsocial can do to revert its current trajectory. It's not about the company, but the very core of its business model does not work, not one but dozen of similar companies failed early, are livingsocial and groupon trying to run some sort of ponzi scheme on desperate investors and employees?

bitcartel 14y ago
That is the $818 (now $918) million question. Even a hotdog stand is doing better than LivingSocial. Why would investors throw good money after bad? "We are a company that does over half a billion in revenue. If we stay diligent, we hope to turn the corner to become profitable soon."
tptacek 14y ago
I don't care. I don't follow LivingSocial or the "daily deals" space, but I do follow startup news, and it's good to know that "PrivCo" is not to be trusted.
socalnate1 14y ago
I disagree. Daily deals can work, but only at the right scale, with the right focus on the right types of markets What groupon, livingsocial, et al assumed was that this was an endless market and would work for every type of business. This is clearly not the case. Whether these particular companies can get to the right size and find the right market remains to be seen - but I don't believe this is a "ponzi scheme" at all.
untog 14y ago
It's reasonably obvious that the investor does not agree with your assertion that "the very core of its business model does not work". You can't state something like that as inarguable fact. I don't doubt for a second that LivingSocial is experimenting with it's models, innovating and trying new stuff. It might not work out, but the investor clearly has enough confidence that it will to invest more cash.
- eduardordm 14y ago
  They are doing it for so long and so many other companies have failed, in many other countries, that I'm starting to think that will never work. But really, this is just a completely arguable point of view, sorry if it came out a bit despotic.
- damoncali 14y ago
  That's not necessarily true. They might be pushing for a liquidation for a value higher than their investment, netting a gain at everyone else's expense.
jdminhbg 14y ago
> What I do not understand is: what does an 'investor' expects 'injecting' 110 million dollars on a bankrupt business? According to the PrivCo article, they got first rights on liquidation. So they'd be either getting a huge part of a miracle turnaround, or most of their money back when the company was sold off in bankruptcy. Of course that article appears to be completely wrong, so I guess it doesn't actually matter. But there's your motivation for investing in a dying business.
- TylerE 14y ago
  What value will the company have in bankruptcy. That's a lot of Aeron chairs and used iThings to get anywhere close to $100m in value.
  - damoncali 14y ago
    I'm half joking, but have you seen their offices?
damoncali 14y ago
Most likely, a quick liquidation for something a little more than 110M. Given that they appear to be first in line, it could be a nice return, even if the totality of the investment is a dog.
ry0ohki 14y ago
It's an existing investor solidifying a deal. Kind of like if you bought a stock at $40, and now it's down to $20. You look at the company and think "OK, maybe our initial investment was at a high valuation, but I think think there is a good chance we can at least get our initial money back if we keep you afloat for a while", so you buy more stock at $20, making your overall cost basis lower. Without that investment you are guaranteed to lose your money, but this way you are doubling down on your original bet, and giving the company some more runway to potentially at least break even on the exit.
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bitcartel 14y ago

That is the $818 (now $918) million question. Even a hotdog stand is doing better than LivingSocial. Why would investors throw good money after bad? "We are a company that does over half a billion in revenue. If we stay diligent, we hope to turn the corner to become profitable soon."

tptacek 14y ago

I don't care. I don't follow LivingSocial or the "daily deals" space, but I do follow startup news, and it's good to know that "PrivCo" is not to be trusted.

socalnate1 14y ago

I disagree. Daily deals can work, but only at the right scale, with the right focus on the right types of markets What groupon, livingsocial, et al assumed was that this was an endless market and would work for every type of business. This is clearly not the case. Whether these particular companies can get to the right size and find the right market remains to be seen - but I don't believe this is a "ponzi scheme" at all.

untog 14y ago

It's reasonably obvious that the investor does not agree with your assertion that "the very core of its business model does not work". You can't state something like that as inarguable fact. I don't doubt for a second that LivingSocial is experimenting with it's models, innovating and trying new stuff. It might not work out, but the investor clearly has enough confidence that it will to invest more cash.

eduardordm 14y ago
They are doing it for so long and so many other companies have failed, in many other countries, that I'm starting to think that will never work. But really, this is just a completely arguable point of view, sorry if it came out a bit despotic.
damoncali 14y ago
That's not necessarily true. They might be pushing for a liquidation for a value higher than their investment, netting a gain at everyone else's expense.

jdminhbg 14y ago

> What I do not understand is: what does an 'investor' expects 'injecting' 110 million dollars on a bankrupt business? According to the PrivCo article, they got first rights on liquidation. So they'd be either getting a huge part of a miracle turnaround, or most of their money back when the company was sold off in bankruptcy. Of course that article appears to be completely wrong, so I guess it doesn't actually matter. But there's your motivation for investing in a dying business.

TylerE 14y ago
What value will the company have in bankruptcy. That's a lot of Aeron chairs and used iThings to get anywhere close to $100m in value.
- damoncali 14y ago
  I'm half joking, but have you seen their offices?

damoncali 14y ago

Most likely, a quick liquidation for something a little more than 110M. Given that they appear to be first in line, it could be a nice return, even if the totality of the investment is a dog.

ry0ohki 14y ago

It's an existing investor solidifying a deal. Kind of like if you bought a stock at $40, and now it's down to $20. You look at the company and think "OK, maybe our initial investment was at a high valuation, but I think think there is a good chance we can at least get our initial money back if we keep you afloat for a while", so you buy more stock at $20, making your overall cost basis lower. Without that investment you are guaranteed to lose your money, but this way you are doubling down on your original bet, and giving the company some more runway to potentially at least break even on the exit.

deleted 14y ago

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