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What really happened at LivingSocial?

finance.fortune.cnn.com

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Re: What really happened at LivingSocial?

#91

Post by anon808 »

tptacek wrote: post #87
philwelch wrote: post #72

Earlier quoted context omitted.

How do we know LivingSocial is the truthful one? Companies in their death throes have published bigger lies.

Because PrivCo published material falsehoods that are easy to refute alongside the (likely) falsehoods that are harder to refute.

Just because privco is full of shit, doesn't mean livingsocial isn't in trouble.

The sad truth is that this down round will hurt the employees more than they know, or are being told. Down rounds aren't made under the same terms as up rounds where the company has the advantage. When the investor has the advantage the terms will weigh heavily in favor of the investor protecting their cash, so what looks like equity today may not be in the future.

Re: What really happened at LivingSocial?

#92

Post by jrs235 »

tptacek wrote: post #80
onetimecomment wrote: post #68

privco's sales people e-mailed the address on my company's domain and offered research services. when we declined, four days later an article ran on privco (an 'exclusive') reporting that we refused comment on something we had never seen which was an article full of made-up dire horseshit. so I was left explaining to my employees why this company was out to get us and no, I wasn't misleading them about our finances.…

It's like the shareholder lawsuit shakedown, only targeting private companies.

I wonder if they have short bets (in systems like InTrade or similar shadow trading systems) on the companies they drag through the dirt.

Re: What really happened at LivingSocial?

#93

Post by damoncali »

pg wrote: post #34

This comes on top of an article a few days ago that (to people in the business at least) was almost as preposterous, in which their ranking criterion for VC funds was number of acquisitions. http://www.privco.com/top-20-venture-capital-firms-with-the-...

I once was peripherally involved in a large commercial real estate deal in a major city. The press (a major paper- I forget which one, specifically, but you'd recognize it) reported the value of the deal without including the debt, which was most of the financing. It is hard to be more wrong about financial matters than that, but that is the state of financial journalism.

Re: What really happened at LivingSocial?

#94

Post by tptacek »

anon808 wrote: post #91
tptacek wrote: post #87

Earlier quoted context omitted.

Because PrivCo published material falsehoods that are easy to refute alongside the (likely) falsehoods that are harder to refute.

Just because privco is full of shit, doesn't mean livingsocial isn't in trouble. The sad truth is that this down round will hurt the employees more than they know, or are being told. Down rounds aren't made under the same terms as up rounds where the company has the advantage. When the investor has the advantage the terms will weigh heavily in favor of the investor protecting their cash, so what looks like equity tod…

I don't care. I don't follow LivingSocial. The question I answered was, "how do I know PrivCo is the one being dishonest?"

Re: What really happened at LivingSocial?

#95

Post by damoncali »

dailyrorschach wrote: post #75
tptacek wrote: post #63

Earlier quoted context omitted.

FOUR HOURS. That's how much time they claim to have given LivingSocial before running the report. Horsewhip these clowns off the stage now. It's actually even worse if underlying trend they're "reporting" on is true, because they've poisoned the well.

PrivCo looks even worse now with this additional update to CNN's story: "I don't think the real story here is the details of the financing," Hamadeh [PrivCo CEO] said. "It's what's going to happen to the little guys, all of the merchants who are really the company's unsecured creditors, if LivingSocial goes bankrupt... You'll see that we were right in six or nine months."

I think that's exactly right - this wouldn't be a story if PrivCo wasn't mostly right about the big picture. The big picture is one of impending doom at LS, and yes, if that comes to bear, the little guys will get nothing.

Sure, they come off as slimy (and maybe they are - I have no idea). But the details matter less than the overall story here.

Re: What really happened at LivingSocial?

#97

Post by jordo37 »

ebbv wrote: post #81
lawdawg wrote: post #12

Earlier quoted context omitted.

They count it as revenue before paying the merchant. Their true revenue is probably much lower than $500mm.

Ahhhh, ok. That seems like shady accounting to me, then. Calling any money "revenue" before the merchants get their share.

That's not shady accounting, revenue is the income a company receives before handling any expenses, which in this case would include payment of merchants. This is why revenue is called the top-line - it represents the first number on any balance sheet before you subtract anything away.

Re: What really happened at LivingSocial?

#98

Post by damoncali »

untog wrote: post #13
eduardordm wrote: post #5

Earlier quoted context omitted.

What I do not understand is: what does an 'investor' expects 'injecting' 110 million dollars on a bankrupt business? There is nothing livingsocial can do to revert its current trajectory. It's not about the company, but the very core of its business model does not work, not one but dozen of similar companies failed early, are livingsocial and groupon trying to run some sort of ponzi scheme on desperate investors and…

It's reasonably obvious that the investor does not agree with your assertion that "the very core of its business model does not work". You can't state something like that as inarguable fact. I don't doubt for a second that LivingSocial is experimenting with it's models, innovating and trying new stuff. It might not work out, but the investor clearly has enough confidence that it will to invest more cash.

That's not necessarily true. They might be pushing for a liquidation for a value higher than their investment, netting a gain at everyone else's expense.

Re: What really happened at LivingSocial?

#99

Post by tptacek »

damoncali wrote: post #95
dailyrorschach wrote: post #75

Earlier quoted context omitted.

PrivCo looks even worse now with this additional update to CNN's story: "I don't think the real story here is the details of the financing," Hamadeh [PrivCo CEO] said. "It's what's going to happen to the little guys, all of the merchants who are really the company's unsecured creditors, if LivingSocial goes bankrupt... You'll see that we were right in six or nine months."

I think that's exactly right - this wouldn't be a story if PrivCo wasn't mostly right about the big picture. The big picture is one of impending doom at LS, and yes, if that comes to bear, the little guys will get nothing. Sure, they come off as slimy (and maybe they are - I have no idea). But the details matter less than the overall story here.

That's what PrivCo would say to defend what's happened. Like you, they'd be careful to couch the defense in terms of ideas that are hard to falsify. Of course, they got to this point in the conversation by reporting a series of material falsehoods; their initial specificity is what scored them a seat at the table. But let's ignore that they have no credibility anymore and instead entertain our own biases about what's happened.

It is especially easy to pull this off when the topic is a company we don't like.

Re: What really happened at LivingSocial?

#100

Post by PrivCoTeam »

PrivCo has absolutely NO short positions in any private company we cover. These are PRIVATE companies and with rare exception do not trade. Nor do we earn any fees from private companies we cover (and we do NOT accept paid advertising, unless you count a the standard Google links).

We have no agenda other than to try and publish facts, and what LivingSocial announced yesterday immediately struck us as misleading and fishy based on everything we knew about the company and it's dire financials. The press release and memo to employees (imagine you are one of those trusting hardworking employees, or a local daily deals merchant they owe money to "soon") - over $300 Million worth actually, but have only $76 million - made it seem as if the company was doing so well financially that their happy investors who had invested at a $5.7 Billion valuation wanted to double down on their investments and bet even bigger. NOTHING WAS FURTHER FROM THE TRUTH. The company was NOT doing fine, lost over $400 Million last year, was running low on cash, and had to take a massive valuation haircut and grant all sorts of special preferences in order to get this last lifeline of cash.

Their financials can't be papered over...and they verified to the penny as public Amazon.com owns 31% now of the company. Look them up...if you know anything about finance or accounting you will reach the same conclusions as PrivCo did. LivingSocial will soon require mass layoffs, and will be insolvent or sold for pennies on the dollar by the end of this year is our prediction. (And we hope we're wrong, and don't make a dime either way, as we don't want to see 4,000 trusting employees lose their jobs).

But the numbers don't lie and we stick by our prediction.

The PrivCo Team www.privco.com

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