GM paid less for Cruise Automation than was reported | Hacker News Reader

GM paid less for Cruise Automation than was reported

businessinsider.com

47 pointsargonaut21 comments

From an accounting standpoint yes, but in reality they paid about $1B. Half was directly for the company, the other half was golden handcuffs. They are choosing to allocate the second to operating expenses and not acquisitions. To the employees of Cruise, still feels like a sweet billion. For once investors got less and employees got more, which is a refreshing change

Do you have inside knowledge we're unaware of? Otherwise it's hard to say "in reality...." $1B is plausible, but much more questionable given this article.

Dan Primack wrote a clarifying article yesterday: https://www.google.com/amp/amp.timeinc.net/fortune/2016/07/2...

The key part:

because GM GM is being very narrow in how it describes the deal value. The $581 million (or $600 million, whichever you prefer) is the cash and stock that actually went out the Detroit doors during GM’s second fiscal quarter. Not included were a variety of other things, including cash still being held in escrow, expected earn-out payments, employee retention packages and other expected employee compensation (particularly for those with unvested shares at the time of acquisition).

That seems unlikely, as GAAP would require reserving that amount on the balance sheet and typing it to the acquisition.

What Primack describes would be like buying a house and claiming its price is what you paid as the down payment.

Yes, but I find a $400M retention package to be highly implausible. We're talking the kind of compensation that Google/Facebook would spend to retain 40 top executives.

Justin Kan [x], who's brother Dan is the co-founder that's unnamed in the picture of the BI article, snapchatted several times the Cruise deal being $1B / unicorn

I consider this article to be pretty poor, if they wanted to actually find the real price, they could've investigated some more instead of trying to infer from the earnings' reports.

[x] I believe he was also an investor in Cruise

In reality was a reference to the difference between why an acquisition price is reported as so high in the press yet appears on the financial statements as much less. This isn't unique to Cruise. Not a slight at this article.

Surely $500M of retention incentives would be considered 'material' and require disclosure

It would also be a lunatic number for this deal.

Still, $581 million is a lot for a technology inferior to what GM already had through their Cadillac/CMU deal.[1]

[1] https://www.washingtonpost.com/local/trafficandcommuting/dri...

I am still amazed that GM managed to lose that IP to Delphi. It was amazing tech (I worked on it).

Me too. Delphi (which used to be part of GM) is now using Audis. San Francisco to New York via LA and Washington, 99% on automatic.[1] That's way ahead of Cruise. How did GM screw that up? Delphi used to be part of GM, and is still a major supplier. The latest from Cruise is them hitting a parked car at 20MPH on 7th St. in SF.[2]

[1] http://delphi.com/delphi-drive [2] https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049...

Don't forget GM also funded the winning team of the DARPA Urban Challenge in 2007, and then let the majority of talent go to Google. Stanford's entry Stanley came in 2nd and is at the Smithsonian National Air and Space Museum. CMU's entry Boss came in 1st and was left in a garage/workspace and (partially) stripped for parts.

I actually made a mistake. Stanley was the winning entry in the 2005 DARPA Grand Challenge. Junior was the 2nd place winner in the 2007 Urban Challenge.

I think it's hilarious that the main thrust of this article is that "omg, there might be a unicorn we hadn't heard of!!!" As if a company undergoes some significant change when its paper valuation passes $1B. Honestly, $600M or $1000M, for a tiny company is a great exit, and having or not having a silly mythical creature label doesn't affect that.

don't question the narratives. The narratives must be respected. The narratives protect us. The narratives know what is best for us. The narratives love us.

The number listed does not include the golden handcuffs/employee retention bonuses. Given that this was an acquihire, an additional $400MM in bonuses paid out over the next few years is plausible. Especially given that unvested employee grants are included in the non-disclosed employee retention side of the arrangement.

I don't think it's plausible. Sure, it is common for the majority of payouts in acquihires that are in the $1M-$50M range to be through handcuffs. When a company is acquired for $600M, that is not an acquihire, and I would be very surprised if retention payments for such a small number of employees totaled $400M.

I would be happy to be corrected, if someone has heard of situations where small acquired companies had such large golden handcuffs.

The media unquestioningly reported the $1 billion number. This article at least admits "it's unclear where that $1 billion figure came from", but where's the shame about being manipulated into reporting completely made-up numbers?

Related side note:

George Hotz from Comma.ai was interviewed by Jason Calacanis for this week in startups and he trashed the Cruise Automation deal. He said they were too secretive and hinted they did not have very good technology.

http://thisweekinstartups.com/george-hotz-commaai/

How can he claim they have poor tech & be secretive at the same time?

Within SDC circle, Hotz's company so far has shown some pretty poor demos. Really poor. I guess the salesmanship will him raise more $$ but its founded in anything but reality

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