Comment by rvz
19 hours ago
That is a 50% discount, which isn't great for those who got into the latest round.
Seems like Capital One is very excited on the deal and announced it earlier while Brex hid the announcement and made it hard to find. (It's on the Brex [0] journal directory, but you cannot see it featured on its front page)
What (really) happened?
Its not great for those who got in later rounds, but I would assume all the investors had at least 1X preferences, so they'll at least get all their money back.
I think this is a pretty decent outcome for Brex. I read they received a total of 1.3 billion in funding, so a 5.15 billion exit isn't bad, especially since the bottom dropped out of the market for so many fintechs that were founded and had big raises between 2015 and 2021.
I'm curious how the employees faired. Seems like they may bet getting nothing out of the deal if the investors get their money back.
Brex has been around for a long time, so employees will have been issued stock options with vastly different exercise prices.
Early employees' options will have value, but more recent options are likely underwater.
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These days, most employees getting nothing out of the deal is par for the course for acquisitions, unfortunately. The acquisition price is almost never exchanged directly for shares in the company as implied, often a chunk of it is kept for key personnel retention, etc. Typically just enough goes towards the share purchase to make investors happy, and the rest is structured as incentives for founders and key execs with milestone payouts. That‘s the set of people with leverage towards making the acquisition happen, so that‘s who gets paid.
If you‘re just a regular employee with some options, and the acquirer doesn‘t want to keep you on, you should expect nothing.
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While I don't think it's the case here, but a lot of time there is more liquidity preference than the deal value so employees can only get what investor want them to pay.
We know how the employees did. Same as ever. They got whatever slop was left in the trough after the big pigs ate their share.
Bitter about VCs? Me? Never.
> 50% discount
There are liquidity preferences, nobody took a haircut, they may not made a lot of money as long as the sale price($5.1B) is greater than funds raised($1.2B) everyone made some money not as much as they thought, but nevertheless some.
The reason may be different than you think, Capital One is known for its aggressive marketing campaigns and physical mail spam, it is more likely they didn't want to upset the customers and end users on what Capital One will mean
It is quite likely Capitial one will mine the data, monetize the brand, sell other products and target high value users the typical Brex user.
Liquidation preferences may have multiples. A 3x liquidation preference would have erased most gains for anyone who didn’t raise in the last round, employees and founders included.
Fair point, but Brex' business would have had to have been incredibly weak to raise on those terms.
Late round investors at least have liquidation preference. It's the worst outcome for employees.
fintechs are a hard hat area - they make a lot of noise while raising money - but hardly ever mention costs, profitability
hence few fare well in the public markets or when its time for acquisition
This is a weird theory. Brex sent an email to all customers, alongside posting everywhere on social media. You are making your conclusions because they didn't put the announcement on their landing page?
Some people, (eg people who aren't already Brex customers), aren't going to get that email, and aren't following Brex's social media presence. They may not even have a social media account of their own, not even a Linkedin. The only way they would hear about is is via their landing page.
How much you use social media, and are a Brex customer, is going to influence how big you think that group of people is, but it's for sure, non-zero.
I mean, welcome to literally every tech startup valuation 2021 vs now. 2021 was so amazing for stock valuations.
It's as easy as some VC bros desperately searching for a bigger fool and finding it. Most likely CapitalOne management consists of friends with the VCs.
It's just another case of the principal/agent problem and normalized white-collar fraud in US tech.
I don't know why the downvotes, that's most probably what happened. These deals are rarely done for some economic reason, it's mostly because somebody knows someone else who can do it and get mutual benefit, a legalized version of fraud.
So you are saying VC bros are defrauding Capital One shareholders?
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