> Tumblr feels that Yahoo’s $1.1 billion offer as “too low” and view it as “only a first offer”
And then later in the paragraph:
> sources say the company only has a few months of cash runway left.
This must be a joke. If you have a few months of cash runway left, $1.1B is more than enough. Seriously. There is no circumstance when this isn't true, unless you have massive non-cash assets on hand.
Yes, I'm aware that they could go raise more money and try to hold out for more, but let's be serious here: they make (effectively) no money and they're being offered well over a billion dollars. Billion -- with a 'B'. This sort of public posturing is just obnoxious.
I don't understand this mentality and you at least are someone I know I can engage with. So, tell me, what makes you believe that you're qualified to determine what Tumblr's worth? "Billion -- with a 'B'"... so what? Tumblr's worth what they're worth. If they're intrinsically worth more than 1.1Bn because of stats we don't really know about or understand, there's nothing unseemly about turning down an offer that undervalues them.
Also: you can't judge what a business is worth solely by their burn rate or cash on hand. You need more information than that. Every year at a company that has a burn rate is an investment year; they could be reinvesting their income for growth, or forgoing that income for same.
(I have no idea what Tumblr is actually worth in 2013, for what it's worth.)
At the end of the day, it all comes down to: they would sell for $1.1B in a heartbeat without any of this public posturing if they knew they weren't going to get any offers for more money today. They would take the money and be damn happy about it. Instead, they say "pfft, this is too low! We clearly need more for our unmonetized product!"
That's the part that pisses me off, not that they value it differently -- because they don't! They know that $1.1B is a great price for what they have to offer, they just think that they can grumble about it and get a bit more from someone else. This sort of negotiation isn't skillful, it's heavy-handed and completely and utterly transparent.
If they got such an offer, I imagine that they'd be willing to hold out for a couple months to get something better. But a $1.1B offer? That's not something you wait to accept. If they don't get a better offer in the next few weeks, they'll gladly take $1.1B, even if they suspect they can get a bit more in a few months or a year.
I think the mindset that describes people who say something like this may echo what others might think. Particularly the saying "pigs get fat, hogs get slaughtered" comes to mind [1].
Also the idea that value doesn't change and that there is no downside risk to not sellig for 1.1b cash (there is since there is always a down side to any decision to some degree).
I know of business people on a smaller scale who had passed up a almost perfect deal and held out and lost the entire deal because some event happened to change the circumstances. (Health of an individual, market, neighborhood, events (like 911, wars etc.) whatever. Things can and do change.
Take your firm that you sold for example. It is made up of key individuals. At a certain point you decided to sell. What if you had held out? Could have gotten more perhaps but also could have had something happen to a few key individuals that might make the firm less attractive. (Not thinking security consulting going out of favor though obviously).
While non of the examples that I am giving apply to tumblr I'm just pointing out that people tend to not look very closely at what they stand to lose vs. what they are holding out for. At least from what I have seen over time.
I don't know if 1.1 is the right number or not, just trying to give another angle to this.
[1] Greediness maybe that's the word I am looking for here.
Keep in mind that there are many sources of money that you can get to keep you afloat if you have a defacto value like that. (This is not like the local bakery that only has a few months of cash and a local businessman comes along and offers to buy for a nice price - better not pass it up!)
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> Tumblr feels that Yahoo’s $1.1 billion offer as “too low” and view it as “only a first offer”
And then later in the paragraph:
> sources say the company only has a few months of cash runway left.
This must be a joke. If you have a few months of cash runway left, $1.1B is more than enough. Seriously. There is no circumstance when this isn't true, unless you have massive non-cash assets on hand.
Yes, I'm aware that they could go raise more money and try to hold out for more, but let's be serious here: they make (effectively) no money and they're being offered well over a billion dollars. Billion -- with a 'B'. This sort of public posturing is just obnoxious.
I don't understand this mentality and you at least are someone I know I can engage with. So, tell me, what makes you believe that you're qualified to determine what Tumblr's worth? "Billion -- with a 'B'"... so what? Tumblr's worth what they're worth. If they're intrinsically worth more than 1.1Bn because of stats we don't really know about or understand, there's nothing unseemly about turning down an offer that undervalues them.
Also: you can't judge what a business is worth solely by their burn rate or cash on hand. You need more information than that. Every year at a company that has a burn rate is an investment year; they could be reinvesting their income for growth, or forgoing that income for same.
(I have no idea what Tumblr is actually worth in 2013, for what it's worth.)
At the end of the day, it all comes down to: they would sell for $1.1B in a heartbeat without any of this public posturing if they knew they weren't going to get any offers for more money today. They would take the money and be damn happy about it. Instead, they say "pfft, this is too low! We clearly need more for our unmonetized product!"
That's the part that pisses me off, not that they value it differently -- because they don't! They know that $1.1B is a great price for what they have to offer, they just think that they can grumble about it and get a bit more from someone else. This sort of negotiation isn't skillful, it's heavy-handed and completely and utterly transparent.
Wouldn't they sell for $25.53 in a heartbeat if they knew they weren't going to going to get any other offers or money?
If they got such an offer, I imagine that they'd be willing to hold out for a couple months to get something better. But a $1.1B offer? That's not something you wait to accept. If they don't get a better offer in the next few weeks, they'll gladly take $1.1B, even if they suspect they can get a bit more in a few months or a year.
"I don't understand this mentality"
I think the mindset that describes people who say something like this may echo what others might think. Particularly the saying "pigs get fat, hogs get slaughtered" comes to mind [1].
Also the idea that value doesn't change and that there is no downside risk to not sellig for 1.1b cash (there is since there is always a down side to any decision to some degree).
I know of business people on a smaller scale who had passed up a almost perfect deal and held out and lost the entire deal because some event happened to change the circumstances. (Health of an individual, market, neighborhood, events (like 911, wars etc.) whatever. Things can and do change.
Take your firm that you sold for example. It is made up of key individuals. At a certain point you decided to sell. What if you had held out? Could have gotten more perhaps but also could have had something happen to a few key individuals that might make the firm less attractive. (Not thinking security consulting going out of favor though obviously).
While non of the examples that I am giving apply to tumblr I'm just pointing out that people tend to not look very closely at what they stand to lose vs. what they are holding out for. At least from what I have seen over time.
I don't know if 1.1 is the right number or not, just trying to give another angle to this.
[1] Greediness maybe that's the word I am looking for here.
"If you have a few months of cash runway left"
Keep in mind that there are many sources of money that you can get to keep you afloat if you have a defacto value like that. (This is not like the local bakery that only has a few months of cash and a local businessman comes along and offers to buy for a nice price - better not pass it up!)
1 billion is the new 1 million.