[trevelyan]

I have no dog in this fight, but surely it's hypocritical to slam PrivCo while taking the anonymous commenter above at face value. The company is apparently posting further down on this thread -- why not just ask them your questions directly?

This funding round is going to play out in a way that will make it very clear in a few months who nailed the story and whether this reporting is malicious. If PrivCo is guilty of systemic fraud or extortion, there are surely online discussions that can support the claim. As a web entrepreneur myself, I also find the anonymity here puzzling for another reason -- if I had a legitimate grievance with the company I would be doing everything in my power to inject my story into the national media at this point. Free SEO from CNN and other major news outlets? Sign me up.

[bitcartel]

Looking at the Founder's background and the roster of corporate clients, PrivCo look fairly legit.

http://www.privco.com/our-team/founder-and-ceo

[tptacek]

LivingSocial denied unequivocally the following:

* That the investors PrivCo mentioned as participants were participants or even investors in LivingSocial

* That it was a debt round rather than an equity round

* That the liquidation preferences on the deal came close to 4x

* That it repriced existing shareholders

* That quotes attributed to LivingSocial personnel were real

These are not minor details. They are major details. LivingSocial's CEO would have to be lying about very important facts that will inevitably be public. PrivCo, on the other hand, merely needs to claim they were misinformed by their source to extricate itself.

[FinTech]

It does honestly bug me that LivingSocial's CEO is lying or at least misleading employees and public about several very important facts, and is coming up with more only when forced to do so by privco questions or the press.

First, it bothers me that in this initial memo announcing the funding he said nothing but how terrific it is that their investors love LivingSocial's financial performance SO much that they doubled down with more money. NO mention that they were down to their last month of cash left. NO mention that they had to give up the farm to get the money. NO naming (as is the custom) of the investors who invested (i.e. hiding that some did not...usually ALL prior investors put in at least a nominal amount and a new lead investor "leads the round). Here it was very bizarre the investors weren't named.

And he doesn't say anything about this NOT just being a standard straight VC stock round, but only when pushed by PrivCo he coughs up yea ok the securities do "have some bells and whistles" that makes the employees' stock worth less. No mention of that on Wed. announcement (before privco forced the issue). Then he has the balls to suggest that don't worry if we IPO all of this won't matter. He the the guys KNOWS they'll never IPO.

So call me old fashiond but that just bugs me. And hats off to PrivCo or any other media/research firm that calls companies out (esp private ones you can't even short sell...they took all their time prepping their research and went out ona limn for what? Bunch of blog posts criticizing em b/c CEO who has no more credibility IMO just says so, and he's the son in law of the CEO of the Washington Post, so he can say whatever the f'k he wants and we're all just supposed to take it all at face value.

Obv PrivCo made every effort to get the facts right - they just even outed the sr. exec at Living Social to prove they didn't make up quotes: http://www.privco.com/livingsocial-receives-emergency-110m-c... (at the bottom) - nobody even the NYTImes bats 1,000, but this LIvingSocial CEO's arrogant dishonesty to those 4,000 employees while he cuts a side deal i'm sure so he gets some millions no matter how badly it tanks....well I just don't like it and I don't trust him one bit. It's drip drip drip with this guy. Spit it out: we basically borrowed money, we were almost out of cash, we call it equity but it has interest, loan's due in 4 yrs, we call it a "VC round" but look we had to do it. Now we need a new strategy and streamline.

[trevelyan]

The article I read claimed it was an equity round with some strange preferred stock that had punitive warrants and other guarantees which effectively nixed the value of the existing common stock without technically repricing it. So two of the points are irrelevant (#2 and #4). I can easily imagine a source saying "over three" or "over three if you add up all of the guarantees" and having that become four (#3) while there is no denial of the general claim of punitive liquidation terms. Which leaves #1 as partially wrong and #5 as a he-said-she-said.

PrivCo is contextualizing an apparent leak with what it thinks it knows about the company finances and making a judgment call about the reliability of their sources. That isn't horrible journalism and if they are right this piece is miles above most of what passes for tech journalism online. And if it is wrong they have just tanked their reputation Judith Miller style and posters like the one above will be able to support their claims in the future.

In the meantime, dealing with this sort of thing is part-and-parcel of running a very public business that has taken nearly a billion dollars in outside investment. You are going to have aggrieved investors and employees when things go sour. They seem to be handling it professionally.