Companies saw a lot of growth prospects post pandemic and labor was hard to find and retain so companies are reluctant to downsize. If and when growth prospects dim for the medium term and profits shrink the layoff spigot will open. This is especially true for levered businesses as the majority of private equity deals are unhedged on rates and many don’t have the cash flow to deal with 4 percent LIBOR/SOFR and will need to slash costs. No cash flow tech companies also ripe for a round of job cuts as is anything housing related.
In my opinion most of the pain is going to be felt where it should be felt: overleveraged and unprofitable firms. As long at the government doesn’t somehow step in to bail them out.
Initially. Does it cascade when tech and housing bucks leave the economy? Guess we will find out soon enough.
If the overleveraged firms are banks, though, the threat cannot be contained. I am old enough to remember 2008. The technocrats had some success post 2008 putting in regulatory leverage tests and limits so maybe that will help.
Banks are in way better shape this time and are arguably over capitalized. Bank regulation has worked, generally.
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DASH down 10%. lol
This is another pretty obvious risk of being the winning startup in a contestable industry. Even if you do the impossible and separate yourself from the competition, there are companies a thousand times larger who can simply decide they want in and then crush you. It’s almost better to be a second-best who sells to Amazon, Microsoft, Meta, etc.
It is truly astonishing how many apparently smart people threw billions and billions of dollars at capital intensive companies that don’t scale and are complete commodities. Food delivery is fundamentally an atrocious business.
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The dumbest part is how lots of these “smart” people knew the current business was a loser but somehow automation was going to save it (i.e. self-driving, drone delivery).
All of the “dumb” people that investment billions (of mostly other people’s money) in dubious ventures have lots of money for themselves, drive fancy cars, own multiple properties, etc. Weird.
Where Are The Customers’ Yachts? was published OVER 80 YEARS ago.
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They figured ‘its a landgrab for restaurants’ like everything else these days only network effect based pseudo-monopolies can actually turn a profit in the tech space so spend billions signing up the most restaurants and then shift into monopoly gear and profit but for whatever reason people just don’t seem to be loyal to doordash in the way they were/are to Amazon Facebook etc.
No matter how many times it’s explained to me I still can’t understand how a business that has no inventory or rent and no labor costs (the restaurant and consumer is supposed to pay all of this! And add a fucking tip!) incinerates money.
It’s an app and an outsourced call center. HOW.
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Interestingly it is actually much more than that. Did you know Door Dash has a subsidiary that lends money to restaurants? Because I know that I want my pizza delivery company to also be a bank because that’s innovation!
Door Dash has 6,000 employees. That’s a lot of people to pay to do whatever it is that they do.
Hilariously they seem to think once a person uses a food delivery app once they will pay zero attention to fees after that? Like ok, I’ll use it once with a promo but lol thinking I’ll pay $30 to have chipotle delivered (which is probably what it needs to cost for the business to make any sense!)
In the case of almost all of the Softbank fiascos I believe the primary investor was the Saudi wealth management fund. AKA the biggest fish in the entire game.
It isn’t that astonishing when you get paid 2 percent of committed capital.
What you’re describing would be a solid little business, it would turn a profit, and it would be worth a reasonable valuation. DASH was valued at $100 billion, so that wasn’t going to be the narrative that gave them a chance to maintain that or grow. They needed a taking over the food business and revolutionizing the world narrative, and you’ve gotta hire a bunch of people for that and have them work on like revolutionizing lending to restaurants and optimizing driverless deliveries for the future when it may or may not be a thing. Stuff like that, very serious, very business.
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Gamestop is up 11% on the announcement that they’re going to split their stock 4-for-1. People on reddit seem to genuinely believe–because it’s a stock dividend rather than a stock split–that this means they’re going to instantly have 4 times the number of shares at the same pre-split price.
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