Book · How it goes wrong

Billion Dollar Loser

Name: Billion Dollar Loser
Author: Reeves Wiedeman

Reeves Wiedeman · 2020

How WeWork reached a $47bn valuation and lost it in weeks once public-market disclosure made the economics visible.

Why it is here

The narrative arc is the most instructive on this shelf: nothing about the business changed materially in 2019, but preparing for a public offering forced disclosure of economics and governance that private rounds had never required, and the market's reaction was immediate.

For an angel that translates into a usable test. Ask what a company would have to disclose in a public offering and whether it would survive that reading — the answer is available years before anybody has to find out for real.

The book is also good on how a valuation gets set by the enthusiasm of a single large investor rather than by anything the business is doing, which is a dynamic that reaches all the way down to seed rounds.

Read it if

You want to understand how a private valuation and a public one can differ by an order of magnitude.

Skip it if

You have already read The Cult of We — they cover the same events.

Pair it withSuper PumpedMike IsaacA reported account of Uber under its founding chief executive — governance failure at a company that, unlike most on this shelf, survived.

What it explains

Terms this covers

Protective provisionsA list of company actions that cannot be taken without the consent of a specified majority of preferred shareholders — regardless of what the board or the founders want.SeniorityThe order in which different classes of preferred shares are paid from exit proceeds — whether later rounds rank ahead of earlier ones, or all preferred ranks equally.Exit waterfallThe order in which sale proceeds are distributed — creditors first, then each preferred class by seniority, then ordinary shareholders — and the calculation that tells you what your shares are actually worth.