Things tagged matt levine:

Rat in Broth

Matt Levine's daily commentary on financial matters frequently makes me giggle. Here is a particularly good one:

“Rat in Broth Wipes $190 Million Off Restaurant Chain’s Value” is the unappetizing headline here: Shares of Xiabuxiabu Catering Management, a Chinese public company, lost 12.5 percent of their value in two days after, you know, Rat in Broth. Rat in Broth will do that. (There’s a picture.) But the thing about Rat in Broth is that anyone could put a Rat in Broth, leading at least one person to speculate on Twitter about the possibility that this could be “intentional share price manipulation.” [ … ]

One thing I will say for short sellers is that many of them really do believe their (standard, correct) claims about their role in financial markets: that they make markets more efficient, deflate bubbles, root out fraud and delusion, and generally make the world better with their unpopular and negative activity. They see it as a noble but misunderstood calling.

Obviously you could approach short selling in a totally different way: You could short a perfectly good company and then try to blow up its factories, murder its executives and put rats in its broth. This would be strictly inefficient, not only from a financial-market perspective but also from a product-market one: If this was really how short selling worked, then all our cars would fall apart and all of our broth would have rats in it.



Mark to market

Matt Levine at Bloomberg:

In other totally normal unicorn rapid valuation-doubling news:

SoftBank Group Corp. is in discussions to invest another giant slug of capital in WeWork Cos., with a deal that would value the shared-office company at $35 billion to $40 billion, according to people familiar with the matter.

Such an investment would roughly double WeWork’s $20 billion valuation, set last August when SoftBank invested $4.4 billion in the company.

I have to say, if SoftBank is going to become the entire market for hot private technology startups, then every valuation is going to be marked-to-SoftBank, and the numbers will start to lose their meaning. 

SoftBank: Would you like some money at a $10 billion valuation?

Startup: Sure.

SoftBank: Here you go. Would you like some more at a $20 billion valuation?

Startup: Sure.

SoftBank: Here you go. How about a $40 billion valuation?

Startup: This is dumb but it’s not like we’re going to say no.

SoftBank: Here you go.

Startup: Thanks brb buying a yacht.

SoftBank: Our mark-to-market investment returns are tremendous, we must be good at this.