Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley • Hacker News Board

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#21

Post by streetcat1 » Wed, Oct 09, 2019, 1:38 AM UTC

diego wrote: post #4

What would Wall Street care? All that matters is that a company goes public while there is still some (perceived, at least) upside for retail investors. If the main company of going public is to give investors / employees liquidity, then of course they are going to bomb. If the company has real upside, then it will be fine.

Retail investors represent at most 5% of trading, most likely 1%. And even then most of them are in index funds. The game today was consolidated into huge players, almost all are institutions.

The problem here is that of pricing (and nothing more).

Wallstreet wants to pay X, but VC wants 5X. This is why the "window" is closing.

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#22

Post by AmericanChopper » Wed, Oct 09, 2019, 1:43 AM UTC

dvt wrote: post #18

ProfessorLayton wrote: post #13

Earlier quoted context omitted.

While yes indeed some employees have waited many years for a liquidity event and want a payout for their hard work, the other shareholders are LPs with a venture capital target date on their funds. This means that the company will either need to keep raising money to buy out earlier investors that need to hit their fund target dates (Rather than raise it all for themselves), or they'll need to go public at some point…

> This means that the company will either need to keep raising money to buy out earlier investors ... Isn't this the literal definition of a Ponzi scheme? Isn't using new money to pay old investors technically illegal?

No. A Ponzi scheme uses money from new investors to pay returns to old ones. Generating liquidity for investors to sell equity is not at all similar.

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#23

Post by simplebuilder » Wed, Oct 09, 2019, 1:47 AM UTC

This is some hit-piece reflecting anxieties in the Bay Area in the wake of the WeWork fiasco, rather than a meaningful appraisal of value that you’d see from a publication with credibility from Wall Street’s point of view. Don’t buy the hype!

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#24

Post by jrumbut » Wed, Oct 09, 2019, 1:50 AM UTC

dvt wrote: post #18

ProfessorLayton wrote: post #13

Earlier quoted context omitted.

While yes indeed some employees have waited many years for a liquidity event and want a payout for their hard work, the other shareholders are LPs with a venture capital target date on their funds. This means that the company will either need to keep raising money to buy out earlier investors that need to hit their fund target dates (Rather than raise it all for themselves), or they'll need to go public at some point…

> This means that the company will either need to keep raising money to buy out earlier investors ... Isn't this the literal definition of a Ponzi scheme? Isn't using new money to pay old investors technically illegal?

In a Ponzi scheme there isn't an actual business occurring, or only the facade of one. If they make money, they can stop raising from investors.

The line can be a little fuzzy, since some Ponzi schemers pretend to be an honest business and some real businesses end up being, functionally, a Ponzi scheme.

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#25

Post by dvt » Wed, Oct 09, 2019, 1:52 AM UTC

jrumbut wrote: post #24

dvt wrote: post #18

Earlier quoted context omitted.

> This means that the company will either need to keep raising money to buy out earlier investors ... Isn't this the literal definition of a Ponzi scheme? Isn't using new money to pay old investors technically illegal?

In a Ponzi scheme there isn't an actual business occurring, or only the facade of one. If they make money, they can stop raising from investors. The line can be a little fuzzy, since some Ponzi schemers pretend to be an honest business and some real businesses end up being, functionally, a Ponzi scheme.

Makes sense, thanks for the clarification!

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#26

Post by xeeeeeeeeeeenu » Wed, Oct 09, 2019, 1:53 AM UTC

I don't understand why "food-delivery startup" counts as a "tech company".

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#27

Post by paxys » Wed, Oct 09, 2019, 2:01 AM UTC

pbreit wrote: post #19

the_watcher wrote: post #8

Comparing direct listings to IPOs always seemed odd to me. An IPO is a fundraising event . A DPO does not raise any money for the actual business, but it gives liquidity to existing shareholders. The reason we're seeing them now is that there are companies who don't need an IPO to raise money, but have shareholders who have waited 10 years for liquidity.

DPOs do not preclude company from raising money. Slack did.

No that is exactly what a DPO means. Slack did not issue new shares or raise any money when it went public.

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#28

Post by twblalock » Wed, Oct 09, 2019, 2:09 AM UTC

xeeeeeeeeeeenu wrote: post #26

I don't understand why "food-delivery startup" counts as a "tech company".

Delivery of this kind is a three-agent problem: the company needs to coordinate between the restaurant, the driver, and the customer to make the whole thing work. This includes matching the customer to a driver who is in a good position to deliver on time. Keep in mind that the dispatcher, restaurant, driver, and customer may have no prior relationship.

You can do that at a small to medium scale without a lot of technology, e.g. taxi dispatch in a city can be operated by a small group of people in an office. But to scale such a service across an entire country, or the world, operating 24/7, is a massive coordination problem where technology can have a huge impact.

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#29

Post by [deleted] » Wed, Oct 09, 2019, 2:11 AM UTC

the_watcher wrote: post #8

Comparing direct listings to IPOs always seemed odd to me. An IPO is a fundraising event . A DPO does not raise any money for the actual business, but it gives liquidity to existing shareholders. The reason we're seeing them now is that there are companies who don't need an IPO to raise money, but have shareholders who have waited 10 years for liquidity.

[deleted]

Re: Postmates’ new IPO delay indicates Wall Street is turning against Silicon Valley

#30

Post by tomnipotent » Wed, Oct 09, 2019, 2:15 AM UTC

paxys wrote: post #27

pbreit wrote: post #19

Earlier quoted context omitted.

DPOs do not preclude company from raising money. Slack did.

No that is exactly what a DPO means. Slack did not issue new shares or raise any money when it went public.

No, it doesn't. Companies can still issue and sell new shares during a DPO. Where did people get this silly idea that companies do not raise capital during a DPO?

Slack simply chose not to do so.