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Comment by game-of-throws | Hacker News Reader

I wonder if these wild valuations could be kept in check if there were a way to short/buy puts on private companies. There's positive pressure on valuations from the funding, but scant negative pressure.

Scooters-as-a-service can probably be a profitable business worth millions, but you had to be really out of touch to think it could be worth billions.

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That defeats the whole point of a private company, and take away most of the benefits. The thing with the scooter business is that there isn't really a moat for it. Any number of players can come into the market(and they did) and just run the price down the bottom. But by that point a company can probably IPO and transfer the risk from the VCs to the public market.

I kind of have a secret about this: if you’re an accredited investor, you could 100% take short positions on these shares by borrowing shares from employees and seeking them in one of the random secondary markets that’s out there.

It’s just no one does because the asymmetric downside of going naked short on companies with low market caps (“uh oh, Uber just bought this company for 10x my strike price because xyz stupid reason”)

If you want to get really complicated you can write puts, but good luck pricing them and finding enough liquidity.

Did you mean write calls?

Yeah the problem is liquidity, and the "bespoke" nature of this kind of bet. I can't just stroll into Bird HQ like Christian Bale and ask them to do all the work for me. I only want to risk a few thousand, not millions. Even setting up the deal might cost more than I was willing to risk in the first place.

Yeah good call out.

As someone who has never/will never write a contract, I had the mental block of flipping it vs. buying.

Also I always wonder about margins. They have software component, but they also have rather expensive hardware. And then overhead of management of that hardware. Like paying people to relocate and charge them as needed.

You can bet on anything. I’m sure you can find a bookie that would provide spreads on a company going under or not.

Unpopular opinion: I know there would be other problems to solve if things were different, but I wish there was no such thing as private companies. As it is, private companies are an investment vehicle that regular people just don't have access to. It's a game of who knows who with very little regulatory oversight. Maybe early stage startups don't need a ton of regulatory oversight (they have other things to worry about), but maybe it also shouldn't be legal to have a private company with a market cap over a billion dollars.

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