Silicon Valley’s ‘unicorns’ have regulators worried • Hacker News Board

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#21

Post by djcapelis » Sat, Apr 02, 2016, 9:00 PM UTC

seibelj wrote: post #17

Uhhh doesn't a VC need to close out their position eventually? And mark a return on their fund? If you take VC money you can't be private forever, you need to be acquired or go public.

Not entirely true, the other option is that other people buy the VCs out of their stake in the private market. In sharply profitable companies, a company could in theory buy itself back from its own investors without needing to be either acquired (it acquires itself, essentially) or doing an IPO.

Of course, your company actually has to be making money to do this. Which for most unicorns is something of a problem.

All investment is essentially debt. At some point either someone else chooses to hold it at a value that is mutually agreed on, or the company buys itself back.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#22

Post by Houstonymous » Sat, Apr 02, 2016, 9:01 PM UTC

erikpukinskis wrote: post #18

Why would I want to sell a company that I enjoy running to a bunch of people who want to turn it into cash? Public markets seem to be for people who want to take on some debt or are tired of being responsible for the future of their business.

I'm going to present two points of view here:

1. Well they used to be for when society recognized that once a large societal and social phenomenon that is a large corporation (really just lots of people agreeing to work together to do something), that at some point that abstract group had some kind of obligation to the public, given, at some point, it becomes hard to separate the public from the corporations (given who staffs 95% of the roles at such mega-corps).

So basically, public markets were for allowing the public to invest in what had essentially become public phenomenon.

Also, once a company becomes public, it's fucking naive to call it "enjoyable" and assume that's as nuanced as you get when thinking about that decision.

Also, you're an idiot. "A company going public wants to take on some debt."

No, they want to sell equity, specifically because they would rather do that than sell bonds ie raise debt.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#23

Post by koolba » Sat, Apr 02, 2016, 9:02 PM UTC

Haha. This reminds me of the Simpsons where Homer takes Mr. Burns's boat out to international waters (to circumvent local drinking laws) and the coast guard tells them to come back so they can be under their jurisdiction.

    Bart: [through a bullhorn] Hey, Coast Guard!  Try to stop us now, you lousy Americans.
    Coast Guard: [through a loudspeaker] We can't hear you!  Come three hundred feet closer!
    Bart: Nice try.  You're not going to nail us.
    Coast Guard: But we just want to party.
    Bart: Oh, really?  Then play some rock music.
    [Man on cutter mimics the guitar riff from "China Grove"]
    Homer: [joins in] Come on, Bart!  The Coast Guard's covering the Doobs!

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#24

Post by [deleted] » Sat, Apr 02, 2016, 9:06 PM UTC

fiatmoney wrote: post #2

Regulator with power for regulating public companies warns of the grave danger in companies not being public. They could be escaping their benevolent oversight!

[deleted]

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#25

Post by golemotron » Sat, Apr 02, 2016, 9:21 PM UTC

_yosefk wrote: post #8

golemotron wrote: post #7

This was a predictable effect of increased regulation of public companies, (SOX) etc, and awareness that a founder can move more strategically without being concerned with quarterlies and accountability to shared owners. Politically it's unsustainable. If we see a half dozen more unicorns with household names people will tie completely private ownership to concerns about inequality: no way for the average person to b…

You could buy shares in GS or any other public company investing in private companies and/or underwriting IPOs, so there's that. That said, the idea that public capital markets are widely considered to be a way to increase equality , of all things, is stunning to me. I thought/think that people supporting capital markets view them as a method for companies to raise capital in exchange for a share of future profits, a…

> That said, the idea that public capital markets are widely considered to be a way to increase equality, of all things, is stunning to me.

Never underestimate the power of spin. Private just has to look worse than public on equality, and it does. I wouldn't be surprised to see an article about this in the next few weeks as journalists compete for eyeballs.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#26

Post by golemotron » Sat, Apr 02, 2016, 9:34 PM UTC

ams6110 wrote: post #16

golemotron wrote: post #7

This was a predictable effect of increased regulation of public companies, (SOX) etc, and awareness that a founder can move more strategically without being concerned with quarterlies and accountability to shared owners. Politically it's unsustainable. If we see a half dozen more unicorns with household names people will tie completely private ownership to concerns about inequality: no way for the average person to b…

VCs may be less concerned with the next quarter than public shareholders, but at some point there will be accountability, since they will want to get their money. That requires an IPO, generally, does it not? Or at least an acquisition by an even larger company.

What if the successful private company buys out its VCs? I don't know why that can't happen.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#27

Post by cynical_sheet » Sat, Apr 02, 2016, 9:36 PM UTC

ubernostrum wrote: post #14

cynical_sheet wrote: post #10

What natural right do these regulatory agencies (or group of thugs known as government) have to regulate free people who choose to associate freely? What they are doing is deeply immoral.

What "natural right" do people have to free association? (hint: the answer is none, because there is no such thing as a "natural right")

So, there is really no objective justification for the existence of US government, because its supposed purpose it to protect 'basic rights', such as life, liberty and pursuit of haaapineeess(i.e. ensure that subset of homo sapiens species can release endorphins, dopamine, anandamide...). Since rights don't exist, there is nothing to protect. It's kinda like paying security staff to protect non-existing house. BTW, contingent rights flow from natural rights and if those are illusory, then all rights and laws are not justifiable.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#28

Post by makomk » Sat, Apr 02, 2016, 9:41 PM UTC

koolba wrote: post #23

Haha. This reminds me of the Simpsons where Homer takes Mr. Burns's boat out to international waters (to circumvent local drinking laws) and the coast guard tells them to come back so they can be under their jurisdiction. Bart: [through a bullhorn] Hey, Coast Guard! Try to stop us now, you lousy Americans. Coast Guard: [through a loudspeaker] We can't hear you! Come three hundred feet closer! Bart: Nice try. You're n…

Isn't that the episode where they get hijacked by pirates and the coastguard sit back and laugh at them? An interesting analogy, certainly.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#29

Post by Ologn » Sat, Apr 02, 2016, 9:42 PM UTC

_yosefk wrote: post #8

golemotron wrote: post #7

This was a predictable effect of increased regulation of public companies, (SOX) etc, and awareness that a founder can move more strategically without being concerned with quarterlies and accountability to shared owners. Politically it's unsustainable. If we see a half dozen more unicorns with household names people will tie completely private ownership to concerns about inequality: no way for the average person to b…

You could buy shares in GS or any other public company investing in private companies and/or underwriting IPOs, so there's that. That said, the idea that public capital markets are widely considered to be a way to increase equality , of all things, is stunning to me. I thought/think that people supporting capital markets view them as a method for companies to raise capital in exchange for a share of future profits, a…

> I thought/think that people supporting capital markets view them as a method for companies to raise capital

You are correct, people supporting capital markets do view/promote them as a method for companies to raise capital. If you look at the data though, this turns out to be misleading. The amount of money companies raise in initial or subsequent stock offerings through the public capital markets are a fraction of what they raise through other methods. Less than 7% of corporate investment capital is raised through stock offerings. Also, this is not just the case nowadays, it has been like this since the 1940s, and even before that.

Re: Silicon Valley’s ‘unicorns’ have regulators worried

#30

Post by erikpukinskis » Sat, Apr 02, 2016, 9:55 PM UTC

djcapelis wrote: post #19

erikpukinskis wrote: post #18

Why would I want to sell a company that I enjoy running to a bunch of people who want to turn it into cash? Public markets seem to be for people who want to take on some debt or are tired of being responsible for the future of their business.

Isn't that true for all forms of investment? Including VC?

To some extent, yes. But if the company is private, a minority shareholder can only sue a majority holder under the terms of the sale. In a public company they can sue under the terms of the SEC. If the company is private, the majority shareholder can act against financial interests if they like.

Public companies are trying to box out specific areas where they might legally do that: C-corps, mission-based exemptions during public sale, etc

But—and this is full on opinion now—I suspect when the chips are down, the courts will rule that Google can't just burn a pile of value because "we like Science" or somesuch thing. They'll get away with it as long as the pile of money is growing. And hopefully that's "forever". But maybe forever isn't as long as we think it is. The world is changing. Snapchat cometh.