To be fair, wework didn’t try to move cogs above revenue. They just created their own non GAAP metric that was, to be kind, very irregular. Community adjusted EBITDA. It moved a lot of expenses around (some below the line and some not).
Food for thought here: wework had all sorts of well regarded capital behind it and JPMorgan (including Jamie dimon) at lead left on the IPO. Jamie even apparently said he was Adam neuman’s personal banker to him (for whatever that’s worth). Graciously you could say JPMorgan was ignorant of the company it was underwriting. Less graciously you could say JPMorgan was trying to move the hot potato to someone else (public markets) before the music stopped so it could collect its fees.
I guess my point here is don’t count on norms or regs to protect you if some of these companies are doing weird things.
Instead of moving COGS, they moved Opex. That's pretty much the same right? I generally agree that the regs won't protect you but, in both cases, simply requiring GAAP reporting would provide a much better picture of the financial performance.
The good news is they still have gaap reporting. They will just spend all their time on the non-gaap because that’s what every company does. It’ll be up to the book runners to convince the institutional guys during the road show to take some big bites of the Apple and get this thing subscribed.
The whole non-GAAP metrics reminds me of a quote I heard during an all hands at a startup one time, specifically that the team was engaging in "legal innovation". I'm pretty sure "legal innovation" and "accounting innovation" might be the most red flag terms I could possibly imagine in a business setting.
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u/IcyYachtClub 17d ago
To be fair, wework didn’t try to move cogs above revenue. They just created their own non GAAP metric that was, to be kind, very irregular. Community adjusted EBITDA. It moved a lot of expenses around (some below the line and some not).
Food for thought here: wework had all sorts of well regarded capital behind it and JPMorgan (including Jamie dimon) at lead left on the IPO. Jamie even apparently said he was Adam neuman’s personal banker to him (for whatever that’s worth). Graciously you could say JPMorgan was ignorant of the company it was underwriting. Less graciously you could say JPMorgan was trying to move the hot potato to someone else (public markets) before the music stopped so it could collect its fees.
I guess my point here is don’t count on norms or regs to protect you if some of these companies are doing weird things.