Not an expert but do any companies ever make a guarantee that they will make money in the future? This seems like the requisite legalese and a non-story unless companies do make guarantees.
>Meanwhile in risk factors, Lyft warned it has never made any money and can’t promise it ever will, a disclaimer popularized by companies like Twitter, Square, Etsy, Box, Dropbox, Snap, Blue Apron, Shopify, Twilio, Spotify, and of course the patron saint of all profitless companies, Amazon.
This type of disclosure is quite literally standard in almost every type of public company financial disclosure. Surprised this made it to the HN front page
The author provides a snarky pre-response to those who point out that virtually every IPOing company is unprofitable (IPOs are fundraising events, after all) and that such a "risk factor" is S-1 boilerplate going back decades.
And proceeds to gloat over not understanding Business 101 ("invest money to make money").
Only in the mentally insane groupthink that is Silicon Valley is a company admitting they will never make a profit not only normal but desirable. I hope you buy lots of Uber and Lyft stock and eat shit when this bubble pops.
One question, is how is "profit" defined? For example, if a company has surplus cash based on a given base of assets and current operating expenses, then that surplus is typically profit. However, if that surplus is used to buy new assets or pay down debt principle, I would consider that to be similar to profit because it tells me that the company would be profitable if it wasn't expanding (or, that it will be profitable once the debt is paid off, assuming all else remains the same).
Profit means income exceeds expenses for a given period of time. There are different types of profit, i.e., gross profit, is just the profit on the primary business activity (sales or services income), while net profit is the profit after all expenses are taken into consideration. There's also cash-flow profit, which is gross profitability adjusted for some but not all non-operating expenses.
And just to make things even more confusing, there's unicorn accounting profit, in which gross bookings as treated as revenue even though they are never earned by the startup (think Groupon, GrubHub, etc.).
Its defined by whatever accounting standard they are used. Profit is usually income less costs required to bring in that income. In your example the that surplus isn't profit. That's more of a balance sheet item, so an asset. If you have $10m in cash and buy say a factory, that doesn't effect your profit
Historically, most companies that IPO are profitable, and were going public to scale their profits with additional investment. It is mostly a Silicon Valley thing to IPO when unprofitable, and especially to IPO before a path to profitability has even been identified.
These are terrible charts. With the comparison to Uber and the lack of horizontal grid lines or trend lines, you can't see how Lyft is performing at all. And the comparison to Uber is only somewhat relevant in valuing Lyft.
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[ 3.1 ms ] story [ 42.1 ms ] threadAnd proceeds to gloat over not understanding Business 101 ("invest money to make money").
And just to make things even more confusing, there's unicorn accounting profit, in which gross bookings as treated as revenue even though they are never earned by the startup (think Groupon, GrubHub, etc.).