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After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

bloomberg.com

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

#111

Post by zby »

empath75 wrote: post #103
zby wrote: post #88

Earlier quoted context omitted.

"We have talked about this strategy before, and actually reading the article mostly assuaged my concerns about SoftBank’s bookkeeping. In fact, SoftBank says that it doesn’t aggressively mark up its unicorn portfolio (and take accounting profits) every time it pumps in more money on its own. When it invests in later rounds alongside other investors, providing some external validation for the new valuation, it will ma…

So one guy thinks it’s fine. Everybody, it’s okay.

There is more than just Matt Levine's opinion - there is his explanation. The SoftBank accounting is not exactly what the journalists suggest, I still don't think it is fine (I don't quite agree with Levine) - but the article is not correct either.

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

#112

Post by mathattack »

onlyrealcuzzo wrote: post #58
nabla9 wrote: post #18

Earlier quoted context omitted.

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.

It’s complicated, and has a long history. The Japanese industrial complex has generally been more tightly linked than the West. (Perhaps cultural reasons?). Suppliers and customers frequently had large cross-holdings. The system works when the goals are well known, but can prove tough to change.

After WW2 the US occupational forces were going to dismantle the giant corporate groups (Kerietsu) but decided to keep them in place to strengthen Japan as a counterbalance to North Korea.

Despite this, the links weakened over time. While there are cases like the ones with SoftBank, this isn’t a new phenomenon.

And before we judge the system too harshly, in 30 years Japan went from a post-nuclear dystopia to a first world economy. It’s managed to keep the economy moving despite an aging population and very low birth rates. There are lots of “But X...” though it’s still a fascinating economy.

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

#113

Post by mathattack »

tenpies wrote: post #110
mathattack wrote: post #96

Earlier quoted context omitted.

The Saudi government was the major investor. He pays them back with positive PR. It becomes tricky when he mixes Vision Fund business with SoftBank business.

And if you're the Saudi government, your biggest concern is probably not Softbank, the Vision Fund, or WeWork - it's the Aramco IPO. The valuation range for that was comical with it being anywhere from slightly under $1 Trillion USD to $2 Trillion USD depending on who you ask. I mean you can use WeWorks as a scale for that sort of spread.

Yes. And that’s an entirely new shell game. (Similar though - small float of shares yields a huge valuation which can be borrowed against...)

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

#114

Post by hogFeast »

onlyrealcuzzo wrote: post #67
hogFeast wrote: post #43

Wow...finally. This is happening in public companies too btw. Draper Esprit, Scottish Mortgage Trust, Woodford (he was marking up his "genius" cold fusion play all the way...this is real life, 2019, amazing)...the way positions are marked is very suspect, and the general public just doesn't understand (they see NAV as cash in the bank).

Would you mind going into a little more detail? I'm intrigued, but I don't even know where to start learning more about this.

Just read about accounting so you understand how different assets are valued (i.e. the difference between an asset that is marked-to-market and marked-to-make believe). And then start looking through public companies that hold private assets (i.e. they will report financials to the SEC or wherever).

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

#115

Post by dboreham »

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…

Sounds like venture capital.

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

#116

Post by dboreham »

rifta wrote: post #78
neffy wrote: post #52

Earlier quoted context omitted.

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 ge…

>and then, one day, the music stops, and there aren't any chairs to sit on, at all... What would the signs be, sights seen or sounds heard just before the music stops?

Loads of people on CNBC saying there's remotely no signs of an impending crash?

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

#117

Post by user5994461 »

ska wrote: post #74
andrewprock wrote: post #64

Earlier quoted context omitted.

It's possible it was "sold at a loss" but the early investors made money. e.g. by investment round: A: $1m for a $10m valuation B: $5m for a $40m valuation C: $12m for a $100m valuation A "fire sale" of $15m would yield a profit for Series A investors, a probable loss for B, and a certain loss for C.

Or if they were already in financial trouble and C came in with 1.x liquidation preference, they get everything (or near it)

But A and B would have liquidation preference too, so how is the money split?

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

#118

Post by Denzel »

zackmorris wrote: post #90

I'm deeply concerned about the direction that the tech world is going. I had hoped that early successes like eBay and PayPal would lead to democratization and egalitarianism, but sadly that's not the case. Where I had hoped to see something like a gig economy where anyone could jump in and out of work when they needed money, and multiple sources of ~$100,000 funding for startups, today I see a doubling down on race-t…

> Where are the examples of tech billionaires making it and working to make that possible for all the rest who failed?

> Concerns like this are beginning to dominate my psyche to the point where I'm not sure I want to be in tech anymore.

That’s a part of the problem. People, like you, that consider these questions and would like to make positive a difference, give up.

Because the proposition is an ambiguous long-term play where you could spend a lifetime trying to solve it with little to no results at the end. If these issues are important to you, then wouldn’t it be worth it though?

You’ll have no better opportunity to fix this than by being in the position you’re in now. Which is, an “insider”, that can easily command $100-300K salary+stock that can readily be invested in many of your own ideas and businesses in a bid to ratchet your liquid capital up to >$10M. This capital can then be used to propel you on to >$100M or >$1B or wherever you think is the best point to make a difference in the problems you’re seeing.

You’re only two hops away from making a difference. As opposed to people that are scraping by on $20-60K a year with little to no savings and thus no resources or time to dedicate to more self-actualized pursuits. They’re four to five hops away.

Each hop probably carries 5-7 years worth of effort plus potential risk of ruin.

Point being: don’t give up. Go make a difference in the problems you’re seeing.

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

#119

Post by ska »

user5994461 wrote: post #117
ska wrote: post #74

Earlier quoted context omitted.

Or if they were already in financial trouble and C came in with 1.x liquidation preference, they get everything (or near it)

But A and B would have liquidation preference too, so how is the money split?

A and B may not have it at all, and anyway if C pushed a hard bargain, theirs will come first.

At any rate, the devil is very much in the details.

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

#120

Post by dboreham »

semiotagonal wrote: post #44
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 don't think a smaller number of dumb startups will have much negative impact, considering the huge numbers of highly paid employees the giant "fang companies" have.

Except when the FAANG company revenue turns out to be driven by the same fake money faucet.
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