Comment by dctoedt | Hacker News Reader

Comment by dctoedt | Hacker News Reader

Parent Full thread

WeWork's litigation counsel might have wanted the pitch-deck stuff to go into the S-1 to make the information more understandable to non-business people. That way, the pitch deck would be an official part of the record; in turn, this would mean a couple of things:

1. If disgruntled investors were to sue WeWork, the pitch-deck material could be referred to by WeWork's counsel in tactical maneuvering such as a motion for judgment on the pleadings, without having to jump through all the hoops that might otherwise be required;

2. Worst case, if a lawsuit ended up going all the way to a jury trial, the pitch-deck material presumably would be sent back into the jury room as a "real" exhibit, allowing the jury to review the pitch-deck material during deliberations. (The jurors might even be given individual notebooks with copies.) In contrast, if the pitch deck were left out of the S-1, the judge might or might not allow it to go back into the jury room, especially if it were a so-called demonstrative exhibit prepared for the litigation.

(I teach my contract-drafting students to draft agreements with an eye toward being readable by judges and jurors, with tables, footnotes, non-legalese language etc. — and if the contract language is understandable to a juror, then the parties' business people will be able to get to signature more quickly and are less likely to get into disputes afterwards.)

As a jury consultant who's worked on a lot of securities and M&A-gone-wrong litigation, I don't understand why you think it would be beneficial for pitch deck stuff to go into a disclosure. If I were a defendant accused of making misrepresentations, I'd most likely want the pitch deck kept out. "Pitch deck stuff" is aspirational, to put it charitably. A defendant would ideally want to take the opposite position-- that it made only bullshit-free, clear-eyed representations about upside prospects and downside risk.

Also, I totally disagree about the evidentiary issue and would venture to say you're wrong. First of all, the idea that you'd need to cram a pitch deck into a filing in order to get it into evidence is downright silly. A defendant could easily get it into evidence through a fact witness or PMQ. Second, and more importantly, you wouldn't want to do it in anticipation of litigation because you'd lose any control you might otherwise have had over its admissibility (a filing like that would be pretty much guaranteed to come into evidence). Third, and relatedly, you wouldn't want to do it because, pursuant to my second point, it's then going to come into evidence in all of your cases. As they say, the record is forever.

> As a jury consultant who's worked on a lot of securities and M&A-gone-wrong litigation

Plaintiff- or defense side?

> If I were a defendant accused of making misrepresentations, I'd most likely want the pitch deck kept out.

That's never gonna happen (keeping it out), so good defense counsel will grasp the nettle and get out in front of the issue.

Also (something I didn't mention before but should have): There's a jury-psychology benefit to being able to say, in effect, we submitted all this to the SEC, and they approved the registration. It's analogous to why patent applicants are well-advised to tell the USPTO about all the prior art that they know of — so that at trial, the patent owner's trial counsel can respond to the infringer's counsel with, yeah, we know about that prior art, because WE TOLD THE EXAMINER about it, and s/he issued the patent, so who ya gonna believe — this infringer's BS argument, or the government expert who was tasked by law with issuing only valid patents? That helps fend off infringers' invalidity challenges.

> "Pitch deck stuff" is aspirational, to put it charitably.

I perused the S-1; at first glance, that pitch-deck stuff is exactly what I imagine WeWork's litigation counsel might affirmatively want the judge, the judge's law clerk, and/or the jury to see — and, at trial, for an expert witness to be able to use as a visual aid in explaining the value proposition to the jury. (I've never done securities litigation, but I used to do IP litigation for complex technologies, where similar principles apply.)

> A defendant could easily get it into evidence through a fact witness or PMQ.

True, but again, it's always nice to be able to point out to the judge/law clerk/jury that this is what was disclosed to the SEC, and that the SEC approved the registration. Sure, legally that fact has very little weight; psychologically, though, it can't hurt and it costs essentially nothing. (You do have to make sure it's factually unchallengeable, but top-flight securities counsel will do their best to achieve that anyway.)

> Plaintiff- or defense side?

On the whole I do more defense work, but plenty of both. For securities, more often defense. For M&A gone wrong, more often plaintiff.

I take your point about getting out ahead of the issue, but I'm not convinced that it's as powerful an argument as you think it would be, and I think it introduces other risks. Since you're familiar with IP litigation, you're no doubt aware that patents get invalidated by juries all the time in trials where plaintiff counsel makes that argument.

Yeah, except that's not how this works outside the theoretical realm.

In practice, those that actually took companies public know that the more terrible crap you throw into the S-1 ( pitch deck included ) as long as you state that risk-wise you are probably a terrible investment for the public, the better protected you are from the lawsuits in the future when the public's investment does not pan out: you say 'we are doing X and this is our rosy pie in the sky pitch deck, but we must tell you the risk is that none of this is helping us to make money. Buyer beware'

Should one look at the S-1s of the tech companies that went public in last 4-5 years one would see that pattern

Source: Attorneys engaged by the investment banks to help companies to IPO.

This is also true. Back when I was drafting my then-company's Form 10-K annual reports, for just that reason I loaded up the risk section with a list of all the things that could go wrong, based on studying similar lists from the big software companies. It's sometimes known as vaccination or inoculation — "hey, we told you all these things that could make our stock price go south!"

(The danger with this approach, of course, is that if you inadvertently leave something out, the plaintiffs' lawyers will spotlight the omission and argue, "they LIED!")

Your actions are reason, why this (yours incl) sections are useless from investor perspective.

Take for example a risk from We Work company S1: > the sustainability of our rapid growth and our ability to manage our growth effectively;

translation: getting older may cause you die.

in other words: dont put your cat to microwave, and beware as your tea might be hot in your cup.

It's all about the incentives.

Personally I prefer the dry version of SEC fillings. More to the point and with less marketing and PR crap. Also shows you that the finance department is filled with dry professionals, and as much as these finance people can be a pain less professional ones are real curse especially if form matters more than function. Like at my current gig which apparently won an award for their annual reports, the report mind you and not the reported figures. I tried reading it, if you ask me at least 75% are fluff and of the reminder a lot is just lacking substance.

Should we just interpret these filings as CYA measures, or do they show the company preparing for an ugly legal battle with investors? Is it possible to tell the difference?

Reply on news.ycombinator.com