[whimsicalism]

> When an acquisition sells at the same price as money raised, good sign the company isn't worth that much - it's just the minimum $ amount that would allow the Board to sign off on it.

You realize this makes absolutely no sense, right?

[baldajan]

From a pedantic perspective, maybe... another way to put it:

    real_company_worth = sum(valueOf(technology), valueOf(people), valueOf(assets))
    sale_price = max(total_money_raised_owed, real_company_worth)

    if sale_price == total_money_raised_owed {
        sale_price < real_company_worth // likely, since rarely total_money_raised_owed == real_company_worth
    }

Better?

[whimsicalism]

No, I still actually do not follow, nor does this seem equivalent to what you said.

"sale_price < real_company_worth"

This statement in that conditional seems like it could never be true.

If sale_price == total_money_raised_owed, then real_company_worth <= total_money_raised_owed because sale_price = max(total_money_raised_owed, real_company_worth).

Therefore, inside the conditional, sale_price = total_money_raised_owed >= real_company_worth, therefore sale_price >= real_company_worth which is the opposite of sale_price < real_company_worth.

What am I missing? Perhaps you meant min?

[baldajan]

you're right that my math is wrong in regards to sale_price < real_company_worth - it should have been the other way around... (real_company_worth < sale_price)... I guess I needed more coffee...

max is correct though (whichever value is highest, that sets the base price).

[jrochkind1]

shareholders would rather lose only half of their investment then all of it. It's quite possible for a company to sell at a shareholder loss.

And of course, some sheareholders lost their stakes in this sale.

> Because the company’s obligations to its preferred shareholders exceeded the sale price, investors won’t be paid out in full, according to a document reviewed by Bloomberg.

[onlyrealcuzzo]

No! Why do you think people are going to pay $80M for Genius if it's worth $1M?

Companies rarely sell for less than the total amount raised. This is true. It doesn't mean that buyers regularly pay double for something because the company wouldn't otherwise sell. It means the buyers just don't buy it!

If Genius was really only worth $1M - we probably wouldn't ever hear about it - because they probably wouldn't ever sell it for that price.

[baldajan]

Have you ever been part of a company sale before or been at a private meetings/meetups where founders talk about how they sold their business? I've never sold a company, but I've talked privately with many that have (and have raised considerable sums).

Very common that the baseline is the amount of money raised - it's why sometimes companies die and not get sold. Other times, companies will use amount of money raised as leverage to increase the final sale price (based on investor expected returns).

Money raised plays a huge factor in regards to sales price, or if a sale occurs at all.

[nemo44x]

If they had $79m in cash/liquid and no debt then their enterprise value was $1m and a sale for $80m would make sense at a $1m valuation. But yeah, doubt that.

[lmm]

It's irrational, sure. But it seems like a very human way of thinking. Anchoring is real.