After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny • Hacker News Board

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#21

Post by thkim » Thu, Nov 28, 2019, 4:11 PM UTC

Traster wrote: post #8

The more I hear about this the more it looks like this entire scheme has turned into a pyramid scheme. Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms…

Could it be that Vision Fund is a grand scheme to vacuum global liquidity, especially from the Middle East? In the absence of war these days, Weapons of Financial Mass Destruction might exactly be what is needed.

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#22

Post by ben_jones » Thu, Nov 28, 2019, 4:13 PM UTC

saiya-jin wrote: post #16

chvid wrote: post #12

Earlier quoted context omitted.

Dear commenters on HN. Don't bite or spite the hand that is feeding you. The recession will come soon enough.

I'd claim that most folks here aren't directly in this area and couldn't care much. The mostly quiet majority I would call us. And recession? It won't be started by this but bigger forces. A correction might be even healthy for most in long term.

I respectfully disagree, I think there is a massive trickle down economics affect going on even if it’s just local. The auxiliary companies selling into startups is HUGE from recruiting agencies, design firms, the gig economy, local tax revenues, commercial real estate, law and accounting services, one medical offices, and much much more. When VC funding slows down a lot of these places will shutter (because few people in management ever prepare for a downturn).

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#23

Post by CPLX » Thu, Nov 28, 2019, 4:21 PM UTC

TaylorSwift wrote: post #19

Traster wrote: post #8

The more I hear about this the more it looks like this entire scheme has turned into a pyramid scheme. Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms…

I want to point out that a lot of these valuations are signed off by well-known accounting firms, valuation firms, and consulting firms. If it's really one big conspiracy to prop up valuations via recent financing, loans, or market comparables, then wouldn't one of these parties call it out (well, inherently a lot of these are paid by organizations to do their valuations, so true independence is a question here). Add…

> so true independence is a question here

You managed to figure it out before even hitting the end of the sentence in which you posed the question.

Money works kind of like particle physics. Once you start to operate on a fundamentally different scale, basic laws of nature start to change.

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#24

Post by scotth » Thu, Nov 28, 2019, 4:22 PM UTC

chewz wrote: post #13

carrozo wrote: post #3

When SoftBank buys shares in a startup and then invests again at a higher valuation, Son says he has made a profit. That is legal under accounting standards, but SoftBank receives no money. The only change is that SoftBank has boosted the value of its original stake from, say, $1 billion to $2 billion by raising the value of the startup. In SoftBank’s income statements and return calculations, at least some of the ad…

Everyone is really doing this. GAAP allows for this. Making value out of hot air. Generating paper profits through re-valuation of assets, especially intangible assets or where there is no mark-to-market. Softbank had been a little bit more creative then usual (arranging large loans to founders to lead another round of financing) I must admit. At some point the music stops and then you have a quarter or two of really…

Interesting. Where can I read more?

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#25

Post by t_mann » Thu, Nov 28, 2019, 4:24 PM UTC

"Yet it turned out that Agarwal [founder and CEO of a SoftBank-backed startup] had borrowed $2 billion to finance his share of the purchase"

According to a recent article in the Economist, SoftBank encourages its own employees to do the same with SoftBank shares. There is a chance that things go well and they will look like geniusses (like Michael Dell who took his company private in 2013 and returned to markets last year). If things don’t go well, however, they’ll become a case study for Business Schools on business practices to avoid.

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#26

Post by brown9-2 » Thu, Nov 28, 2019, 4:26 PM UTC

TaylorSwift wrote: post #19

Traster wrote: post #8

The more I hear about this the more it looks like this entire scheme has turned into a pyramid scheme. Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms…

I want to point out that a lot of these valuations are signed off by well-known accounting firms, valuation firms, and consulting firms. If it's really one big conspiracy to prop up valuations via recent financing, loans, or market comparables, then wouldn't one of these parties call it out (well, inherently a lot of these are paid by organizations to do their valuations, so true independence is a question here). Add…

Have you forgotten about the housing bubble and crash of 2007/2008 already?

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#27

Post by chewz » Thu, Nov 28, 2019, 4:26 PM UTC

TaylorSwift wrote: post #19

Traster wrote: post #8

The more I hear about this the more it looks like this entire scheme has turned into a pyramid scheme. Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms…

I want to point out that a lot of these valuations are signed off by well-known accounting firms, valuation firms, and consulting firms. If it's really one big conspiracy to prop up valuations via recent financing, loans, or market comparables, then wouldn't one of these parties call it out (well, inherently a lot of these are paid by organizations to do their valuations, so true independence is a question here). Add…

> It would be awkward to say that these valuations are wrong with so many people having their inputs.

The purpose of external consultant is to guess what client is expecting from you and deliver exactly that. Usually the management requires a stack of papers to cover their asses in case of risky deal, sometimes to get an argument in some internal struggle. They never expect objective truth or independent thinking.

There is no conspiracy here just the market forces at work. Imagine what happens to consultancies who do not deliver..

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#28

Post by StuffedParrot » Thu, Nov 28, 2019, 4:27 PM UTC

TaylorSwift wrote: post #19

Traster wrote: post #8

The more I hear about this the more it looks like this entire scheme has turned into a pyramid scheme. Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms…

I want to point out that a lot of these valuations are signed off by well-known accounting firms, valuation firms, and consulting firms. If it's really one big conspiracy to prop up valuations via recent financing, loans, or market comparables, then wouldn't one of these parties call it out (well, inherently a lot of these are paid by organizations to do their valuations, so true independence is a question here). Add…

> If it's really one big conspiracy to prop up valuations via recent financing, loans, or market comparables, then wouldn't one of these parties call it out.

Not if they accept the same culture of growth that enables this in the first place—it’s certainly still speculation, not a science. I would love to see the justification behind the $47B valuation.

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#29

Post by dpflan » Thu, Nov 28, 2019, 4:33 PM UTC

nabla9 wrote: post #18

Traster wrote: post #8

The more I hear about this the more it looks like this entire scheme has turned into a pyramid scheme. Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms…

SoftBank bonds account for half of the bonds sold to Japanese retail investors. Ordinary Japanese savers are going to bet burned if SoftBank collapses.

This is an interesting point. Do you have data / references? I’m very curious about this. I’ll search on my own too.

Re: After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

#30

Post by chewz » Thu, Nov 28, 2019, 4:35 PM UTC

scotth wrote: post #24

chewz wrote: post #13

Earlier quoted context omitted.

Everyone is really doing this. GAAP allows for this. Making value out of hot air. Generating paper profits through re-valuation of assets, especially intangible assets or where there is no mark-to-market. Softbank had been a little bit more creative then usual (arranging large loans to founders to lead another round of financing) I must admit. At some point the music stops and then you have a quarter or two of really…

Interesting. Where can I read more?

Reading company reports.

Personally I had been lucky gossiping for years with a friend of mine who is reading and analyzing company reports in professional capacity. And never tired of discussing latest findings over a drink.

He also has a column in a newspaper and lectures on accounting tricks and frauds at economic university. He always jokes that he only shows old tricks to his students and keeps the best bits to himself.

Accounting tricks is also an arms race of sorts apparently.