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

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

#51

Post by _sword » Thu, Nov 28, 2019, 5:20 PM UTC

JumpCrisscross wrote: post #41

TaylorSwift wrote: post #19

Earlier quoted context omitted.

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…

> a lot of these valuations are signed off by well-known accounting firms, valuation firms, and consulting firms There isn’t a theoretical foundation for valuing lossmaking companies. The best we can do is project forward to a cash-flow producing state, where there is good theory, and then discount that value to the present. The projection is essentially guesswork, making homework-checking by valuation consultants so…

I used to work on Wall Street and this is spot on how we guessed at valuations for cash flow negative companies when we were trying to show bottom-up valuation analyses. Otherwise, we might compare the company to a list of peers and value it on some Enterprise Value / Sales multiple (especially in high growth software).

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

#52

Post by neffy » Thu, Nov 28, 2019, 5:28 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…

The Financial Times has been calling SoftBank out for over a year now. Detailed accounting analyses, pointing out very basic issues and warning flags. This is why the WeWork IPO had to be pulled in the first place. Every major crash is preceded by several years of this.

Financial manipulation is the art of getting everybody confused between stocks and flows. As long as the flow continues, the employees of SoftBank get paid, and get bonuses, and everybody keeps dancing around the floor. (Granted the latest proposal there, which is to make them all take out loans of up to 15x their salary to provide the capital for Softbank 2.0 may interfere with that.)

and then, one day, the music stops, and there aren't any chairs to sit on, at all...

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

#53

Post by raesene9 » Thu, Nov 28, 2019, 5:28 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…

I'd say that from the article SoftBank are operating in grey area of accounting regulation.

Combine that with the fact that those auditing/consulting firms are being paid by SoftBank and you can see a strong incentive for them to side with SoftBank's valuation strategy.

I'm sure the risk management people in the Big-4 are looking at this but I'd also guess there's quite a lot of pressure to let it ride, as I'm sure work from SoftBank + it's group companies is worth a lot of money.

It's been the case in many previous collapses, that the auditors signed off on the companies, sometimes quite close to the date they collapsed, and that wasn't even where there is a lot of ambiguity as there is here.

All this isn't to say that the valuations are necessarily otf, but that I can see the incentives that might lead to companies accepting them.

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

#54

Post by reaperducer » Thu, Nov 28, 2019, 5:35 PM UTC

papito wrote: post #17

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…

Thankfully the regulations saved the public before WeWork could enter the stock exchanges. As long as it stays this way, I really don't care if Saudi Arabia sinks billions of dollars into a turkey like I will sink my teeth into one tonight.

The risk is that suddenly all tech investors will want to know what's going on with all of the companies they invested in, and demand actual returns and not pixie dust and double talk.

Can you imagine if the SV bubble was held to the same expectations as real world companies? Half of the Bay Area would curl up and blow away overnight.

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

#55

Post by reaperducer » Thu, Nov 28, 2019, 5:38 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…

I want to point out that a lot of these valuations are signed off by well-known accounting firms

You mean the way Big Five accounting firm Arthur Andersen signed off on Enron's shenanigans?

https://en.m.wikipedia.org/wiki/Arthur_Andersen

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

#56

Post by meddlepal » Thu, Nov 28, 2019, 5:44 PM UTC

reaperducer wrote: post #54

papito wrote: post #17

Earlier quoted context omitted.

Thankfully the regulations saved the public before WeWork could enter the stock exchanges. As long as it stays this way, I really don't care if Saudi Arabia sinks billions of dollars into a turkey like I will sink my teeth into one tonight.

The risk is that suddenly all tech investors will want to know what's going on with all of the companies they invested in, and demand actual returns and not pixie dust and double talk. Can you imagine if the SV bubble was held to the same expectations as real world companies? Half of the Bay Area would curl up and blow away overnight.

You say that like it's a bad thing. Sometimes things need to fail and fail hard so everything can get better in the long run.

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

#57

Post by bhouston » Thu, Nov 28, 2019, 5:44 PM UTC

Alex3917 wrote: post #48

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…

> 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 to create paper gains that don't reflect reality. Is this uncommon? E.g. I don't have any inside info…

Was earn.com acquired at a higher than fair valuation? If so the shareholders of coinbase.com should sue.

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

#58

Post by onlyrealcuzzo » Thu, Nov 28, 2019, 5:52 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.

Isn't SoftBank able to get negative yielding loans (essentially paid to borrow money) from the BoJ also? And doesn't the BoJ own a signficant portion of SoftBank stock?

The Japanese economy sounds like a dystopian Capitalist hellhole to me. I'm hoping I'm just wrong about everything, and it's actually fine.

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

#59

Post by rchaud » Thu, Nov 28, 2019, 5:55 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…

Financial auditors cannot sign off on a valuation, they can only say that the financial results as shown present an accurate picture of the company at the time of review. There will be a section for management to comment on specific line items, usually to give context for things like large one-off expenses, or other things that jump out from the numbers.

Valuation depends on estimates of the firm's future revenue growth, predictions about the business climate, etc. That's what investment analysts do, using the audited financial statements as a basis for developing scenarios for the future.

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

#60

Post by onlyrealcuzzo » Thu, Nov 28, 2019, 5:55 PM UTC

JumpCrisscross wrote: post #33

The press’s thoughtless repetition of headline valuations didn’t help. Even in this article, WeWork’s $7.8bn expected valuation is quoted unadorned. It’s a number that was derived by the same people and processes as the $47bn, yet one is ridiculed and the other presented as fact.

Well the biggest problem is it's less of a $7.8bn valuation and more of a $3Bn minimum valuation (which is still probably far too high).

Startups don't really have valuations like a public company. You don't have anywhere near the same liquidation preferences in public companies as you do with startups. I'm pretty sure the bankruptcy protections aren't as good either.

And people keep making these valuation comparisons anyway. Probably because even in finance you can get loans and whatnot as if the valuations are the same.