High finance.
It is best understood by modelling it as an international criminal conspiracy.
All models are wrong.....
StabilityAI cofounder says CEO tricked him into selling stake for $100
101–110 of 239 posts
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#102Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?
Hanging onto stock from a company I co-founded a few years ago has caused me tons of stress because that company constantly files for tax extensions forcing me to do so as well. I have other financial processes which rely upon timely processing of my completed tax filing, and every year it causes me trouble. So if something is thought to be worthless and about to fold, "just hang onto it" could cause a non-zero amoun…
Sympathy from me.
It is not strange that tax laws favour the well healed lawyered up.
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#103Earlier quoted context omitted.
Small story on these kind of takeovers, but on a MUCH, MUCH smaller scale: Back home we have this small newspaper that's been going on for 25 years. It's just a small 3 man operation, and it's just a weekly paper that covers local stuff in our small county. Most of their customers are expats and older folks. When they started out 25 years ago, they raised funds by selling private stocks. All in all, there are maybe 1…
> A couple of years ago some of the leading media companies in our country (Norway) started consolidating "power" by acquiring small local newspapers all over the country. This sounds like it should be a pretty big story. "Extremely dangerous to our democracy." On the other hand, it also sounds like it wouldn't be.
[deleted]
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#104Earlier quoted context omitted.
> But we missed one rather obscure method. Please share.
It was related to international distribution. I had negotiated royalties for international sales, but had neglected to cover the sale of the rights to sell internationally. So the company just sold the rights, of which I didn't get a piece, and the companies that bought the rights had no obligation to pay me anything.
This sounds like they sold something they never owned - i.e. "the right to sell without paying you royalty". Reminds me of the recent case where Disney tried to argue that in an acquisition, they bought only the rights, but not the obligations (royalty payments) that went with them [1]. Basically, writers were promised X% in royalty payments, but Disney argued they didn't buy that part of the contract, only the part where they now owned the works.
This is not something that should require, in any remotely sane legal system, an explicit contractual clause to prevent.
[1] https://www.hollywoodreporter.com/business/business-news/sta...
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#105I was chatting with a company who sold a large minority stake in their company to a well known private equity group (think 49%) with the explicit purpose of retaining control. Soon after the transaction closed, the PE firm was able to covertly buy another 2% of voting shares from a pre-existing investor in the company, which resulted in the PE firm gaining full majority control over the company, kicked out the CEO, r…
There seem to be 2 problems here: 1. Giving another party 49% doesn't guarantee you will have retaining control. You having 51% shares does guarantee that. So, their strategy was flawed. 2. Not sure if regulations allow this, but to make it bullet proof they should have made a contract that the PR group will not go beyond 49%. Without either of the above, the company just did not do good diligence.
Having 51% control guarantees nothing.
I know a guy who had 51% in the family company. His retired dad had, in exchange for money, deprived the 51% shares of their voting power.
His dad then sold the shares on the local stock exchange.
A couple months later, his CEO/son was fighting a hostile takeover of the family-run, but publicly traded company.
So his son bought the 51% from the local stock exchange, thinking he had a majority.
The guy who owned the actual voting shares showed up at the annual shareholder meeting with attorneys and accountants , a small number of shares, and walked out with the keys to the company.
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#106Earlier quoted context omitted.
It was misplaced trust. That's a really easy mistake to make until you've been burned by it. I'll bet that person won't make that mistake a second time. But better is to avoid swimming with the sharks at all. I have a wonderful horror story about a business deal I made where I was cheated out of about $5 mil. I didn't trust the party I was doing the deal with, so the contract negotiations took most of a year and the…
I feel like the story of the scorpion and the frog applies here. My solution is to try very, very hard not to engage with people I do not trust. My mantra is "good people do good things, bad people do bad things". If you don't want bad things to happen to you, stay away from people you know to be bad regardless of how tempting it may be to associate with them.
do you want the money or not?
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#107Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?
Hanging onto stock from a company I co-founded a few years ago has caused me tons of stress because that company constantly files for tax extensions forcing me to do so as well. I have other financial processes which rely upon timely processing of my completed tax filing, and every year it causes me trouble. So if something is thought to be worthless and about to fold, "just hang onto it" could cause a non-zero amoun…
What's required to let go of the stock? Is a simple signed document sufficient or is it necessary for money to change hands, like in the article?
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#108Earlier quoted context omitted.
There seem to be 2 problems here: 1. Giving another party 49% doesn't guarantee you will have retaining control. You having 51% shares does guarantee that. So, their strategy was flawed. 2. Not sure if regulations allow this, but to make it bullet proof they should have made a contract that the PR group will not go beyond 49%. Without either of the above, the company just did not do good diligence.
Having 51% control guarantees nothing. I know a guy who had 51% in the family company. His retired dad had, in exchange for money, deprived the 51% shares of their voting power. His dad then sold the shares on the local stock exchange. A couple months later, his CEO/son was fighting a hostile takeover of the family-run, but publicly traded company. So his son bought the 51% from the local stock exchange, thinking he…
Well ... how could you not inform yourself with that much money at stake.
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#109Earlier quoted context omitted.
The loose association was with decent researchers, no need to bring them down. I do agree about the rest.
Mediocre in regard to the standard set by other research teams pulling $1B+ valuations. The OpenAI founding team and the recently announced team at xAI are what I would consider to be exceptionally strong groups. Adept, Anthropic, Inflection, and character.ai are also strong. Look at the track records and accolades of researchers at these groups. Ilya Sutskever alone has more research experience than the combined tea…
Wow, the AI field has barely boomed for like 1 year, and we are already all-in on credentialism?
Stable Diffusion has had a very large impact on the entire arts industry, far more people have used SD than have Claude or pi. If another open source startup can reach that level of industry shaking fame and intense user interest, they could have easily be valued at 1B.
If SDXL works out, that'll be another large leap forward. Midjourney's models are stronger, but they can't compete against a legion of 1000 fine-tunes for every purpose.
Re: StabilityAI cofounder says CEO tricked him into selling stake for $100
#110Earlier quoted context omitted.
Mediocre in regard to the standard set by other research teams pulling $1B+ valuations. The OpenAI founding team and the recently announced team at xAI are what I would consider to be exceptionally strong groups. Adept, Anthropic, Inflection, and character.ai are also strong. Look at the track records and accolades of researchers at these groups. Ilya Sutskever alone has more research experience than the combined tea…
Wow, the AI field has barely boomed for like 1 year, and we are already all-in on credentialism? Stable Diffusion has had a very large impact on the entire arts industry, far more people have used SD than have Claude or pi. If another open source startup can reach that level of industry shaking fame and intense user interest, they could have easily be valued at 1B. If SDXL works out, that'll be another large leap for…
Yeah. I still don't see how this will work for _Stability_, but the impact is definitely there.