[TaylorSwift]

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).

Additionally, corporate management theoretically exercise due diligence, along with the valuation committees and the board looking into the reasonableness of the models and associated inputs and outputs. It would be awkward to say that these valuations are wrong with so many people having their inputs.

[neffy]

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...

[rifta]

>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?

[dboreham]

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

[chewz]

> 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..

[JumpCrisscross]

> 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 somewhat useless.

The only real check is other investors participating. That happened with some of Softbank’s investments, but not with others. (Adding fuel to the fire is Softbank’s habit of shutting down the secondary markets around companies it invests in.)

[_sword]

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).

[rchaud]

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.

[brown9-2]

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

[AlexandrB]

Exactly. As long as everyone keeps getting paid no one has any incentive to stop the gravy train.

[CPLX]

> 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.

[reaperducer]

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

[raesene9]

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.

[john_moscow]

The valuation is just an estimate of how much an average investor would like to pay for a share. It's a guessing game trying to predict irrational decisions made by huge and diverse groups of people. Factor in corporate politics and internal competition and you will see that there is no room for reason left.

[altacc]

The accounting firms' motivation is profit, which they derive from the customers they are auditing, so they have an incentive to be favourable to their clients. If you want to be kind to them you can call it an unconscious bias. There have been a few scandals uncovered where an accounting firm audited and approved a company which soon after went bankrupt due to bad or corrupt accounting. For example Carillion, VBS Bank & Enron.

They are also drinking the same Kool-Aid as most other people in the industry, that all this is above board and fine. There's a lot of group-thinking, and not as much objective analysis as is needed.

The blindness extends to management and the board, who all want the company to be successful. Good financial numbers are questioned a lot less than bad ones.

[StuffedParrot]

> 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.