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FanDuel founders to receive no cash from sale to Paddy Power Betfair

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Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#161

Post by rahimnathwani »

stickfigure wrote: post #140
JumpCrisscross wrote: post #5

TL; DR FanDuel was sold for less than its liquidation preference, so common stock holders got nothing.

I'm curious - what happens to the current set of employees in this situation? Presumably some of them have vested stock, and it just got zeroed out. If there's ever a good time to ragequit, this seems like the appropriate hour.

Why would you 'ragequit' at this time, and not before?

If the value of the company of the company is less than the value of liquidation preferences, then the employees' stock is worth ~zero. Its value doesn't suddenly go to zero at the moment a transaction takes place. The transaction happens at that price because that's the value.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#162

Post by bagels »

rahimnathwani wrote: post #161
stickfigure wrote: post #140

Earlier quoted context omitted.

I'm curious - what happens to the current set of employees in this situation? Presumably some of them have vested stock, and it just got zeroed out. If there's ever a good time to ragequit, this seems like the appropriate hour.

Why would you 'ragequit' at this time, and not before? If the value of the company of the company is less than the value of liquidation preferences, then the employees' stock is worth ~zero. Its value doesn't suddenly go to zero at the moment a transaction takes place. The transaction happens at that price because that's the value.

The value of zero may not have been known to those employees before the transaction. Now they know definitively their options are worthless.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#163

Post by mrunkel »

srtjstjsj wrote: post #158
sonnyblarney wrote: post #126

Earlier quoted context omitted.

'Private Equity' and 'Founder' are terms that shouldn't really even cross. PE wants to incentivize leadership, but the concept of 'founder' and all that means, is somewhat beyond. That said - KKR etc. definitely want to incentivize company leaders to make money, and might likely put in significant bonuses for CEO's in the event of an acquisition. But yes ... PE entities may care less about this. But note that it will…

Not necessarily. One pattern of PE is to buy a company, make the company borrow money, spend that money on the PE firm's other interests, and then declare bankruptcy to discharge debts. https://en.wikipedia.org/wiki/Corporate_raid Wikipedia has a nice overview of the topic of this thread: https://en.wikipedia.org/wiki/History_of_private_equity_and_... and of course KKR was the most famous corporate raider in America:…

Amusingly, this is the exact strategy explained by Ray Liotta's character in "Goodfellas" when the restaurant owner gets in bed with the Mob. Somehow it's illegal there.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#164

Post by exolymph »

bookofgreg wrote: post #157
pyrophane wrote: post #151

Earlier quoted context omitted.

What do you mean by that? I'm not disagreeing with your statement, but "toxic" is a strong word and I'd like for you to elaborate.

Some people find it hard to get jobs even in a strong tech market, even if they are brilliant due to a variety of circumstances including random chance that is interviews or finding the position in the first place. Blanket statements like this gloss over the human hardships involved for some, and encourages general lack of empathy among our community.

Ironically, if the initial commenter had fleshed out their position like you did, I think the reception would have been much more empathetic.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#165

Post by rahimnathwani »

bagels wrote: post #162
rahimnathwani wrote: post #161

Earlier quoted context omitted.

Why would you 'ragequit' at this time, and not before? If the value of the company of the company is less than the value of liquidation preferences, then the employees' stock is worth ~zero. Its value doesn't suddenly go to zero at the moment a transaction takes place. The transaction happens at that price because that's the value.

The value of zero may not have been known to those employees before the transaction. Now they know definitively their options are worthless.

Yes. Very sad that option-holders and shareholders often do not have sufficient information about the rights attached to each share class, to estimate the value of their shares (even if they can perfectly value the enterprise overall).

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#167

Post by marcus_holmes »

rahimnathwani wrote: post #165
bagels wrote: post #162

Earlier quoted context omitted.

The value of zero may not have been known to those employees before the transaction. Now they know definitively their options are worthless.

Yes. Very sad that option-holders and shareholders often do not have sufficient information about the rights attached to each share class, to estimate the value of their shares (even if they can perfectly value the enterprise overall).

The options-holders and shareholders may have perfect information about the share structure and preference structure of the company, but unless they're in the room when the deal is being done, they won't know what that means in terms of final value.

The value of anything is the lesser of what someone will pay for it and what the owner will sell it for. The PE team may have raised expectations about the value before the sale, so that everyone thought they would get something despite the preferences. Then they sold it for less...

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#168

Post by rahimnathwani »

marcus_holmes wrote: post #167
rahimnathwani wrote: post #165

Earlier quoted context omitted.

Yes. Very sad that option-holders and shareholders often do not have sufficient information about the rights attached to each share class, to estimate the value of their shares (even if they can perfectly value the enterprise overall).

The options-holders and shareholders may have perfect information about the share structure and preference structure of the company, but unless they're in the room when the deal is being done, they won't know what that means in terms of final value. The value of anything is the lesser of what someone will pay for it and what the owner will sell it for. The PE team may have raised expectations about the value before t…

OK, so we agree that in order to value their shares/options, the employees need:

1) info on the share structure and preference structure

2) a somewhat accurate valuation of the company

Whilst it's possible that people value their own shares wrongly due to missing/wrong info about #2:

- (major) Misunderstanding or not knowing #1 almost always creates a larger error or uncertainty in the calculation, than does an error in #2, and

- (minor) With #2, it's impossible to be certain anyway, so everyone has some of level of error

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#169

Post by erikpukinskis »

exolymph wrote: post #164
bookofgreg wrote: post #157

Earlier quoted context omitted.

Some people find it hard to get jobs even in a strong tech market, even if they are brilliant due to a variety of circumstances including random chance that is interviews or finding the position in the first place. Blanket statements like this gloss over the human hardships involved for some, and encourages general lack of empathy among our community.

Ironically, if the initial commenter had fleshed out their position like you did, I think the reception would have been much more empathetic.

When you say something that triggers someone’s trauma, often their only choice is between an emotional response and simply keeping quiet and hoping to leave the situation.

The same person at a later time (or someone who has obvserved that trauma second hand) can sometimes form a calm, rational, politically correct depiction of the issue for you.

If you demand the latter, you will learn much slower, because you are rejecting the best available information on what things are traumatic to people.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#170

Post by Dwolb »

JumpCrisscross wrote: post #36
Dwolb wrote: post #31

Earlier quoted context omitted.

Sure but those preferences only really affect equity payouts when the company’s in distress. When selling the a non-distressed company, equity will receive cash.

> those preferences only really affect equity payouts when the company’s in distress Liquidation preferences and bankruptcy priority only matter when a company is distressed.

Is it not possible to sell a company that is currently profitable, cash flow positive, and is worth less than what investors had put in?
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