4 ms·
Posting an order and canceling it is fair game. When the order is in the market, it's a live intent to trade. When it's canceled, it's no longer a live intent t
by 001sky 13y ago
Posting an order and canceling it is fair game. When the order is in the market, it's a live intent to trade. When it's canceled, it's no longer a live intent to trade.
Would you recommend this as advice to YC companies looking to secure VC?
Tactic seems ripe for abuse in M&A negotiations as well.
- tptacek 13y agoAre you genuinely asking someone to make a list of the reasons how a VC term sheet differs from a resting limit order?
- 001sky 13y agoNo, I asking why bad faith in purchasing private equity would be any different than public.
- tptacek 13y ago* Because it is incredibly expensive to obtain a term sheet. * Because the term sheet usually has conditions that the entrepreneur is obliged to honor. * Because the term sheet is provided after the VC is given access to all the details of the entrepreneur's financials. * Because the ruthless withdrawal of a term sheet puts the entrepreneur in a distress situation that harms their ability to obtain other term sheets. There are other reasons, but the analogy is, to me, obviously inapplicable.
- 001sky 13y agoThere are other reasons, but the analogy is, to me, obviously inapplicable. Not quite. Use your example of a large block trade. * Because it is incredibly expensive: check * Because the B/D agmt usually has conditions: check * Because the execution is provided after all the details of the trade/'s financials: check * Because the ruthless withdrawal of a term sheet could put the [trader's book] in a distress situation that harms their ability to obtain [another execution]: check.
- tptacek 13y agoNo, you "checked" these by moving the goalposts. Obtaining funding is incredibly hard. Each individual term sheet is also incredibly hard. Shopping a block is hard. Posting a limit order is incredibly cheap, cheaper than it has ever been in human history. Failing to execute also doesn't make posting a next limit order more expensive.
- 001sky 13y agoWhat I outlined above is why your BD acting in bad faith is illegal under the securities law. It's not even a grey area. Put your security research hat on for a moment. The "other side" of the trade wants to get the info subject to BD confidentiality (pt 2) and the exploit them (pt 3,4). When your BD does this it is expressly illegal. This has a name but mentioning it here would just confuse the issue. The question is this: what tools are available to this "other side" that would put the NPI in the hands of the "other side" but not divulge it more broadly? Would a bad-faith offer to do a ("sweet") biz deal be good enough bait to social engineer selective disclosure? Unless you can rule this out technologically, you have to rule it in for consideration. It's best not to get sidetracked on whether the divulged info is legally NPI or PI (just yet) and look at it purely from a pragmatic perspective like a security credential. The BD either has it under control or not. And is it physically possible in terms of bits to have selective disclosure? And if it is does the pretext matter? Make no mistake: the BD cannot hide if he abuses the information directly. He's like an authorized user. The issue is what level of authorization you give the counter-party and how to protect its abuse. The technical details and legality of pretexting security credentials is something I'm sure you could speak authoritatively to. I'm only using it as an example here for illustrative purposes.
- theorique 13y agoNo doubt there's an appropriate timescale where the offer is on the table, and also a time after which the offer is no longer on the table. The same is true for job offers, university acceptance, matching with a medical residency, and all sorts of other contracts. Would it be reasonable for a YC (or other investment) offer to be paired with "decide in an hour or we give it to someone else? Probably not. Would it be reasonable for that timeframe to be a week or two? Probably.
- tptacek 13y agoWhy dignify the comparison? Ruthless withdrawal of a term sheet is simply nothing like canceling a resting limit order. There are two primary reasons: first, it costs tens of thousands of dollars in founder time to obtain the term sheet, and second, because having the term sheet withdrawn creates a signaling problem. Neither of those two things are true, no matter how generous one is with analogies, of resting limit orders.
- 001sky 13y agotptacek--Why are you even in this thread if you're just interjecting rhetorical questions? Both sets of transactions are subject to well known sets of problems. These problems share the same root cause. These are important, fundamental issues with market and market micro-structure. Please don't cross thread you're frustration.
- tptacek 13y agoDespite the question mark, I can't find anything in your comment to reply to. Sorry.