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The company isn’t just magically worth billions because they want it to be and want to exit. That may have worked years ago but those days are over. They’re wo

The company isn’t just magically worth billions because they want it to be and want to exit. That may have worked years ago but those days are over. They’re worth something relative to the revenues they’ve been able to generate. The IP is also worth something but given the cold shoulder from the FAANGs of the world probably not as much as they’d like. At some level these sales start to look like a stubborn buyer that’s asking far too much for their house. It will sell but a painful reset of valuation expectations is clearly required if one wants a sale to close.

hnick 7y ago
Yes I was wondering if it is normal for companies to just declare a sale price like this. I don't pay much attention but I can't remember hearing much about that (apart from implied valuations like Snapchat saying 'no').
seppin 7y ago
Also, when you are trying to sell that's not a good sign about your confidence it what you have. I think they all know it's bunk.
nikanj 7y ago
Ultimately, companies are not sold, they are bought. Without a willing buyer, they have no hope
- asdfasgasdgasdg 7y ago
  > Ultimately, companies are not sold, they are bought. What does that even mean? Companies are both sold and bought. One implies the other. There are always willing buyers for entities with non-negative value. Hell, I'm a willing buyer for Magic Leap, at the right price.
  - manigandham 7y ago
    It's more nuanced. A company being "bought" means that an acquirer actively sought them out because they were such an attractive target. This is the best position to be in. A company being "sold" means that they don't have active interest and instead offer themselves up as a last resort for whatever price they can get. Usually everything is liquidated at the absolute minimum to avoid completely shutting down the company and still marking it as an "exit" on the investors books.
  - aliswe 7y ago
    > I'm a willing buyer for Magic Leap, at the right price. That's exactly the point, the buyer dictates the price it is willing to buy at. At the wrong selling price for a specific product, there are no buyers.
  - wpietri 7y ago
    > What does that even mean? It means the number of potential buyers for a company is generally small. That it's a buyer's market: https://www.redfin.com/guides/buyers-market-vs-sellers-market https://www.redfin.com/guides/buyers-market-vs-sellers-marke... > Hell, I'm a willing buyer for Magic Leap, at the right price. You almost certainly aren't. Magic Leap is burning money at an incredible rate, reportedly $50 million/month. Even if you could buy it for $1 over their cash on hand, you'd be a fool to do it, as you'd have to spend the next several months laying people off, negotiating with creditors, liquidating assets, and fending off lawsuits. It would be miserable, and there's a good chance you'd have little to show for your time. Any serious buyer would expect to put another couple billion in cash in just to get it to where it has a product people will actually pay money for. I'm guessing that isn't you.
- ericd 7y ago
  Sounds like you’ve never heard of hiring a banker to run a sale process?
- manigandham 7y ago
  The best companies are bought, not sold - but fire sales still happen. There are various ways to get bankers/private equity/corp dev to find a home somewhere if you need to liquidate. Given the money raised and all the talent and assets, it's unlikely they'll shutdown completely.
- KKKKkkkk1 7y ago
  I dunno. Warren Buffet has done quite well by buying declining or troubled companies.
blevin 7y ago
The lofty ask price may be unduly anchored by the hypothetical value it could have represented to Google in the scenario where something like this turned out to be the next big platform. Web and later mobile represented big shifts of economic activity, and the incumbents all know they need to place a big bet on candidates for any next potential shift, hence many of them making similar moves on VR, AR, self driving cars, etc. If they didn’t, and missed the next big step entirely, they would be judged to be incompetent; if they did and it simply didn’t pan out, no big deal since all the other players were making similar bets. In this context ML may see itself as still representing that potential future value, while others have updated their pricing based on limited uptake of VR and AR so far. It’s unclear where they could find a buyer at that price.
- arthurcolle 7y ago
  I agree with your analysis, and I think the fact that they've struggled to actually bring a compelling product to market at a price point that attracts consumers (outside of the technology bubble) means that, even if they had the best of intentions at disrupting the market for innovative user interfaces, either they are another Research In Motion (great product, with a long-term idea that wasn't quite ready for primetime yet), or just another side show that won't end up being culturally relevant beyond the passing captivation that individuals felt upon watching their "whale stadium" mock-up video. In retrospect (at the time, even) it felt like complete BS. If you look back at the threads posted on HN, I distinctly remember people calling out their methods as super vague, and probably completely fictitious - amazing to see that the angry, dismissive comments actually turned out to be the most factually based! The problem with Magic Leap is that it was always vaporware. I think the second you start using 3D CGI to "show what the product will be like" you're already kind of fucking up. I mean I get it, if youre building a concept car, you can't just immediately build it. But Magic Leap's videos were always like "yeah literally, it'll be like you're in Avatar." Give me a break. I hope some mega-corp eats up the IP for like 7 cents on the dollar and actually uses some of the tech for something that sees the light of day.
  - beagle3 7y ago
    From what I’ve heard (cannot confirm) their technology has to do with projecting directly into your eye, which for now supposedly provides better augmentation of reality than screen-based systems like Hololens; however, it requires a room fool of equipment to pull through. The valuation was predicated on being able to miniaturize that down to portable size. The thing is, there is no way to “show” this to the masses, and there is not even a comparable experience (you can’t show oculus/vibe in an ad either, but everyone has played with a 3D display at some point even if only static - such as the red disc toy with 3D images whose name escapes me - stereoscope, maybe?) What’s the comparable experience of something projecting into your eye?
sdan 7y ago
IP? Didn't JP Morgan take all their patents last year?
- helsinkiandrew 7y ago
  They assigned their patents to JP Morgan Chase last year presumably as collateral for a loan which they'll get back if they or the buyer pays back the loan: https://www.theregister.co.uk/2019/11/14/magic_leap_imoney/ https://www.theregister.co.uk/2019/11/14/magic_leap_imoney/
- seanhunter 7y ago
  My understanding is Magic Leap assigned them, meaning they are pledged by Magic Leap as collateral on a loan[1]. This means that JPM only actually get them if Magic Leap default. (ie JPM can't just decide to sell those patents right now just like when you take a mortgage the bank can't just sell your house from under you if you remain current on your loan). If I'm JP Morgan I'm sweating this sale process right now because if Magic Leap do default (eg say the sale process tanks and they burn through their remaining cash and default), the recovery on these patents is going to be difficult so JPM will take a writedown on the loan. [1] https://regmedia.co.uk/2019/11/13/ml.pdf https://regmedia.co.uk/2019/11/13/ml.pdf is the patent assignment if you want to see what got assigned
  - baybal2 7y ago
    Their patents are by far not a blocker to the field. Apple has actually have a much bigger patent contention with Beijing University with them holding the lockdown portfolio on the microled, and they recently "tainted" themselves through business relationship with one of Beijing University subsidiaries. It may look to the court, or at least a Chinese one, that they solicited samples from them, and very expensive at that, without stated purpose just to sneak away the tech.
- jimmySixDOF 7y ago
  I hope the cache includes whatever became of US20150016777A1 - the 180 page pièce de résistance application that ripped off literally dozens of UI concepts from various sources. [1] https://www.gizmodo.com.au/2015/02/magic-leap-ripped-off-those-awesome-ui-concepts/ https://www.gizmodo.com.au/2015/02/magic-leap-ripped-off-tho... [by Sean Hollister]
onion2k 7y ago
They’re worth something relative to the revenues they’ve been able to generate. A company is worth a value relative to whatever a buyer believes they'll generate in the future. The historic revenue is often a useful indicator of what that might be, but not always, especially if the company is operating in a very new industry or if the company isn't very old.
- jillesvangurp 7y ago
  Exactly, Magic leap has an ambitious software ecosystem vision that they have had trouble to realize - neither content producers, nor end users showed up in meaningful quantities so far. You can't sell what you don't have. At best it's going to take lots more in investment to make this work, if it ever will. Doubts about that are what is probably driving these rumors. They are also a hardware company with some cool patented solutions that seem to more or less work. IMHO any of the big companies could be potentially interested in adding that core technology to their portfolio. That's worth something but maybe not ten billion. What they don't have is the operational side sorted to build and ship products in volume (at least not as far as I know). They are shipping a product in limited volume to developers only and so far the reception of this device has been luke warm. Presumably this is not the final version. The reason they are allegedly looking to sell is either that they are running out of funding and are having issues securing more and/or because it's clear that their current strategy is failing. The real question of course is what investors stand to lose their money and what kind of financial constructions they can come up with in terms of equity swaps, and portfolio consolidation to protect their investment and turn this into an acquihire/IP grab. I hear Google has a lot of money in this already and its CEO is on the board and it has a history of doing AR stuff (and not quite succeeding). Jack Ma is on the board too.
  - onion2k 7y ago
    Google has a lot of money in this already... My comment wasn't really about Magic Leap, but just valuing companies in general, but to address this particular point the fact Magic Leap is looking for a sale could be seen as Google's reluctance to invest more money, or even that Google is looking for a way out. Neither is particularly good for Magic Leap. The fact someone invested in a company in the past doesn't mean they still believe the company has value or is worthwhile investing in now. The sunk cost fallacy applies here.
echelon 7y ago
> That may have worked years ago but those days are over. Forever? Or is this cyclical?
netcan 7y ago
>> They’re worth something relative to the revenues they’ve been able to generate The days of "weird" values aren't over. The new $trillion companies are worth a trillion because they achieved a lock of one sort or another on a market.... ideally a literal market, a platform or an exclusive data source. That's basically the idea behind most of these valuations, from FB's "outrageous" IPO price to WeWork's shenanigans. Get a "monopoly^" or strengthen an eventual buyer's monopoly. With Youtube, google was buying dominance in online video, with a lock on creators. With Android, they bought a running start to mobile dominance... market locks. Magic Leap's problem is not revenue, it's strategic value. When FB bought oculus for or $2bn They got to be a major competitor in the market immediately.... the assumption being that one or two of the early products will become the dominant platform. What do you get if you buy magic leap? How do you get from here to a product that dominates its market? VR is still not an important market, but it is interesting. Companies will buy into it, but they need to be buying into it. Magic Leap isn't really in the market, nevermind dominant. The technology itself doesn't matter. ^ In the Thiel sense.
janoc 7y ago
The thing is - they don't really have much IP worth anything. They have filed a ton of patents for ridiculous stuff like that "wiggling" fiber idea (the fiber would need to reach ultrasonic speeds to get anywhere close to usable display). Also, according to this, all their patents are assigned to JP Chase as collateral: https://www.kguttag.com/2019/11/10/all-magic-leap-patents-have-apparently-been-assigned-to-j-p-chase-morgan-as-collateral/ https://www.kguttag.com/2019/11/10/all-magic-leap-patents-ha... They want to exit because their investors don't want to pour more money into that bottomless pit, with no prospects of profitability (not to mention that there are other vendors doing the same thing and better/cheaper). So hype things up, offload the worthless junk to some sucker and move to the Caribbean to enjoy the "profits" ...
- fuzzfactor 7y ago
  They've been in the Caribbean the whole time, even if it is the mainland.

hnick 7y ago

Yes I was wondering if it is normal for companies to just declare a sale price like this. I don't pay much attention but I can't remember hearing much about that (apart from implied valuations like Snapchat saying 'no').

seppin 7y ago

Also, when you are trying to sell that's not a good sign about your confidence it what you have. I think they all know it's bunk.

nikanj 7y ago

Ultimately, companies are not sold, they are bought. Without a willing buyer, they have no hope

asdfasgasdgasdg 7y ago
> Ultimately, companies are not sold, they are bought. What does that even mean? Companies are both sold and bought. One implies the other. There are always willing buyers for entities with non-negative value. Hell, I'm a willing buyer for Magic Leap, at the right price.
- manigandham 7y ago
  It's more nuanced. A company being "bought" means that an acquirer actively sought them out because they were such an attractive target. This is the best position to be in. A company being "sold" means that they don't have active interest and instead offer themselves up as a last resort for whatever price they can get. Usually everything is liquidated at the absolute minimum to avoid completely shutting down the company and still marking it as an "exit" on the investors books.
- aliswe 7y ago
  > I'm a willing buyer for Magic Leap, at the right price. That's exactly the point, the buyer dictates the price it is willing to buy at. At the wrong selling price for a specific product, there are no buyers.
- wpietri 7y ago
  > What does that even mean? It means the number of potential buyers for a company is generally small. That it's a buyer's market: https://www.redfin.com/guides/buyers-market-vs-sellers-market https://www.redfin.com/guides/buyers-market-vs-sellers-marke... > Hell, I'm a willing buyer for Magic Leap, at the right price. You almost certainly aren't. Magic Leap is burning money at an incredible rate, reportedly $50 million/month. Even if you could buy it for $1 over their cash on hand, you'd be a fool to do it, as you'd have to spend the next several months laying people off, negotiating with creditors, liquidating assets, and fending off lawsuits. It would be miserable, and there's a good chance you'd have little to show for your time. Any serious buyer would expect to put another couple billion in cash in just to get it to where it has a product people will actually pay money for. I'm guessing that isn't you.
ericd 7y ago
Sounds like you’ve never heard of hiring a banker to run a sale process?
manigandham 7y ago
The best companies are bought, not sold - but fire sales still happen. There are various ways to get bankers/private equity/corp dev to find a home somewhere if you need to liquidate. Given the money raised and all the talent and assets, it's unlikely they'll shutdown completely.
KKKKkkkk1 7y ago
I dunno. Warren Buffet has done quite well by buying declining or troubled companies.

blevin 7y ago

The lofty ask price may be unduly anchored by the hypothetical value it could have represented to Google in the scenario where something like this turned out to be the next big platform. Web and later mobile represented big shifts of economic activity, and the incumbents all know they need to place a big bet on candidates for any next potential shift, hence many of them making similar moves on VR, AR, self driving cars, etc. If they didn’t, and missed the next big step entirely, they would be judged to be incompetent; if they did and it simply didn’t pan out, no big deal since all the other players were making similar bets. In this context ML may see itself as still representing that potential future value, while others have updated their pricing based on limited uptake of VR and AR so far. It’s unclear where they could find a buyer at that price.

arthurcolle 7y ago
I agree with your analysis, and I think the fact that they've struggled to actually bring a compelling product to market at a price point that attracts consumers (outside of the technology bubble) means that, even if they had the best of intentions at disrupting the market for innovative user interfaces, either they are another Research In Motion (great product, with a long-term idea that wasn't quite ready for primetime yet), or just another side show that won't end up being culturally relevant beyond the passing captivation that individuals felt upon watching their "whale stadium" mock-up video. In retrospect (at the time, even) it felt like complete BS. If you look back at the threads posted on HN, I distinctly remember people calling out their methods as super vague, and probably completely fictitious - amazing to see that the angry, dismissive comments actually turned out to be the most factually based! The problem with Magic Leap is that it was always vaporware. I think the second you start using 3D CGI to "show what the product will be like" you're already kind of fucking up. I mean I get it, if youre building a concept car, you can't just immediately build it. But Magic Leap's videos were always like "yeah literally, it'll be like you're in Avatar." Give me a break. I hope some mega-corp eats up the IP for like 7 cents on the dollar and actually uses some of the tech for something that sees the light of day.
- beagle3 7y ago
  From what I’ve heard (cannot confirm) their technology has to do with projecting directly into your eye, which for now supposedly provides better augmentation of reality than screen-based systems like Hololens; however, it requires a room fool of equipment to pull through. The valuation was predicated on being able to miniaturize that down to portable size. The thing is, there is no way to “show” this to the masses, and there is not even a comparable experience (you can’t show oculus/vibe in an ad either, but everyone has played with a 3D display at some point even if only static - such as the red disc toy with 3D images whose name escapes me - stereoscope, maybe?) What’s the comparable experience of something projecting into your eye?

sdan 7y ago

IP? Didn't JP Morgan take all their patents last year?

helsinkiandrew 7y ago
They assigned their patents to JP Morgan Chase last year presumably as collateral for a loan which they'll get back if they or the buyer pays back the loan: https://www.theregister.co.uk/2019/11/14/magic_leap_imoney/ https://www.theregister.co.uk/2019/11/14/magic_leap_imoney/
seanhunter 7y ago
My understanding is Magic Leap assigned them, meaning they are pledged by Magic Leap as collateral on a loan[1]. This means that JPM only actually get them if Magic Leap default. (ie JPM can't just decide to sell those patents right now just like when you take a mortgage the bank can't just sell your house from under you if you remain current on your loan). If I'm JP Morgan I'm sweating this sale process right now because if Magic Leap do default (eg say the sale process tanks and they burn through their remaining cash and default), the recovery on these patents is going to be difficult so JPM will take a writedown on the loan. [1] https://regmedia.co.uk/2019/11/13/ml.pdf https://regmedia.co.uk/2019/11/13/ml.pdf is the patent assignment if you want to see what got assigned
- baybal2 7y ago
  Their patents are by far not a blocker to the field. Apple has actually have a much bigger patent contention with Beijing University with them holding the lockdown portfolio on the microled, and they recently "tainted" themselves through business relationship with one of Beijing University subsidiaries. It may look to the court, or at least a Chinese one, that they solicited samples from them, and very expensive at that, without stated purpose just to sneak away the tech.
jimmySixDOF 7y ago
I hope the cache includes whatever became of US20150016777A1 - the 180 page pièce de résistance application that ripped off literally dozens of UI concepts from various sources. [1] https://www.gizmodo.com.au/2015/02/magic-leap-ripped-off-those-awesome-ui-concepts/ https://www.gizmodo.com.au/2015/02/magic-leap-ripped-off-tho... [by Sean Hollister]

onion2k 7y ago

They’re worth something relative to the revenues they’ve been able to generate. A company is worth a value relative to whatever a buyer believes they'll generate in the future. The historic revenue is often a useful indicator of what that might be, but not always, especially if the company is operating in a very new industry or if the company isn't very old.

jillesvangurp 7y ago
Exactly, Magic leap has an ambitious software ecosystem vision that they have had trouble to realize - neither content producers, nor end users showed up in meaningful quantities so far. You can't sell what you don't have. At best it's going to take lots more in investment to make this work, if it ever will. Doubts about that are what is probably driving these rumors. They are also a hardware company with some cool patented solutions that seem to more or less work. IMHO any of the big companies could be potentially interested in adding that core technology to their portfolio. That's worth something but maybe not ten billion. What they don't have is the operational side sorted to build and ship products in volume (at least not as far as I know). They are shipping a product in limited volume to developers only and so far the reception of this device has been luke warm. Presumably this is not the final version. The reason they are allegedly looking to sell is either that they are running out of funding and are having issues securing more and/or because it's clear that their current strategy is failing. The real question of course is what investors stand to lose their money and what kind of financial constructions they can come up with in terms of equity swaps, and portfolio consolidation to protect their investment and turn this into an acquihire/IP grab. I hear Google has a lot of money in this already and its CEO is on the board and it has a history of doing AR stuff (and not quite succeeding). Jack Ma is on the board too.
- onion2k 7y ago
  Google has a lot of money in this already... My comment wasn't really about Magic Leap, but just valuing companies in general, but to address this particular point the fact Magic Leap is looking for a sale could be seen as Google's reluctance to invest more money, or even that Google is looking for a way out. Neither is particularly good for Magic Leap. The fact someone invested in a company in the past doesn't mean they still believe the company has value or is worthwhile investing in now. The sunk cost fallacy applies here.

echelon 7y ago

> That may have worked years ago but those days are over. Forever? Or is this cyclical?

netcan 7y ago

>> They’re worth something relative to the revenues they’ve been able to generate The days of "weird" values aren't over. The new $trillion companies are worth a trillion because they achieved a lock of one sort or another on a market.... ideally a literal market, a platform or an exclusive data source. That's basically the idea behind most of these valuations, from FB's "outrageous" IPO price to WeWork's shenanigans. Get a "monopoly^" or strengthen an eventual buyer's monopoly. With Youtube, google was buying dominance in online video, with a lock on creators. With Android, they bought a running start to mobile dominance... market locks. Magic Leap's problem is not revenue, it's strategic value. When FB bought oculus for or $2bn They got to be a major competitor in the market immediately.... the assumption being that one or two of the early products will become the dominant platform. What do you get if you buy magic leap? How do you get from here to a product that dominates its market? VR is still not an important market, but it is interesting. Companies will buy into it, but they need to be buying into it. Magic Leap isn't really in the market, nevermind dominant. The technology itself doesn't matter. ^ In the Thiel sense.

janoc 7y ago

The thing is - they don't really have much IP worth anything. They have filed a ton of patents for ridiculous stuff like that "wiggling" fiber idea (the fiber would need to reach ultrasonic speeds to get anywhere close to usable display). Also, according to this, all their patents are assigned to JP Chase as collateral: https://www.kguttag.com/2019/11/10/all-magic-leap-patents-have-apparently-been-assigned-to-j-p-chase-morgan-as-collateral/ https://www.kguttag.com/2019/11/10/all-magic-leap-patents-ha... They want to exit because their investors don't want to pour more money into that bottomless pit, with no prospects of profitability (not to mention that there are other vendors doing the same thing and better/cheaper). So hype things up, offload the worthless junk to some sucker and move to the Caribbean to enjoy the "profits" ...

fuzzfactor 7y ago
They've been in the Caribbean the whole time, even if it is the mainland.