Just because privco is full of shit, doesn't mean livingsocial isn't in trouble.
The sad truth is that this down round will hurt the employees more than they know, or are being told. Down rounds aren't made under the same terms as up rounds where the company has the advantage. When the investor has the advantage the terms will weigh heavily in favor of the investor protecting their cash, so what looks like equity today may not be in the future.
"That same source insists LivingSocial was not days or weeks away from a bankruptcy filing, adding that it had around $28 million in cash at its February low point and was on plan to steadily increase that number even without the new financing. Had that figure not increased, and had no new investment been forthcoming, it still could have survived for several more months."
Regardless of Privco, not exactly encouraging for employees and prospective merchants. I also wonder how much of the $110 million will actually be used for growing the business versus covering current liabilities, such as those due to existing merchants.
Wait, they were down to JUST $28M IN CASH in February right before taking yesterday's financing? If my math is right, looking at their 2012 financials on PrivCo:
Their operating expenses are about $1.4 Billion/year (Revenue + Operating loss = about $1.4 Billion they spend a year). That's $120 Million a month. $4 million a day. THEY WERE DOWN TO JUST 7 DAYS OF CASH! How is that NOT the very definition of a "distressed financing" situation? Correct the record Primack and admit when you're wrong - there's no shame in that - that you were a bit hasty at first, but yes they were down to a dangerously low level of cash and regardless of the financing terms or structured as technically debt or technically equity, that yes this was a distressed financing situation.
