The Liquidity Event Podcast: Episode 66
Episode 66: The Year of the Rabbit
The slowest IPO month in over a decade is a hot topic in today's episode, dear listeners! Followed by an update on the Hong Kong stock exchange timed well in the year of the rabbit (that was a multiplication joke) and a revelation that artificial intelligence knows how much you are willing to pay for a plane ticket before you do! Also on deck are innovations from Rent the Runway and our upcoming Rent vs. Buy webinar (register at brooklynfi.com/events)!
Read the Full Transcript:
Shane:
This podcast is for informational purposes only and should not be considered tax or investment advice.
Speaker 2:
Welcome to the Liquidity Event, a show about all things personal finance with a laser focus on equity compensation. Hosted by AJ and Shane of Brooklyn FI. Each episode will take you through the week's news on FinTech, IPOs, facts, founder wins and fails, crypto, and whatever else these nerds think is interesting. Learn more and subscribe today at brooklynfi.com.
AJ:
Hello, and welcome to the Liquidity Event. We're your hosts AJ.
Shane:
And, I'm Shane.
AJ:
This is episode 66 being recorded on November 2nd, airing on November 4th. Happy, happy, happy Wednesday. Today, we'll be discussing lots of wonderful articles. We've got the slowest IPO month since 2011. We've got big moves on the Hong Kong stock exchange. We find out that Rent the Runway stuffs their bra. And, AI knows exactly how much you want to pay for that flight to take to the Taylor Swift concert in Tulsa, Oklahoma, because the New Jersey concert is sold out. And, we've got some other articles after we get through those. How you doing, Shane?
Shane:
I love that. I'm great. I'm at my sister's house down here in Houston, Texas. I'm in my nephew's bedroom, for anyone watching the video podcast. You can see lots of Batman and Nirvana posters and a gaming computer. So, I encourage you guys to check this out. I have to remind everyone this is not my bedroom. I must say... What is that? A slow clap?
AJ:
That was a slow clap for you. See, it's better when the sounds are turned down.
Shane:
Dear listener, AJ is tuning down the audio soundbites so as not to startle me so much. But, yeah, we had a great Halloween. How was your Halloween?
AJ:
It was great. I spent it with you, or most of it with you.
Shane:
That's true. I forgot about that. Dr. Shaft doesn't have to remember everything. But, no. I mean, down here in Houston, actually on Monday we camp... My sister has a 16 foot skeleton outside of her house. And, they always [inaudible 00:02:13]
AJ:
I love... Suburban Halloween is the best. Yeah, Halloween in a third floor walk up in Brooklyn was not so great. Because, I could see all the cute kids outside trick or treating, but none of them actually came into the building. I guess our building did not have enough decorations or was not... I was ready with my Reese's Peanut Butter Cups, ready to go and nobody came to the door.
Shane:
Oh no, you got to go to the stoop at your place.
AJ:
Right. I didn't realize that. I didn't know the rules.
Shane:
But, you were what, working? You thought some kid was just going to go up three flights of stairs?
AJ:
Well, no, in my old building and when I lived in Manhattan, kids would trick or treat in the building. But, I guess you just got to know what's up with your building. And, it's been COVID for the two years I've lived in this building. So, this was our first Halloween. Anyway.
Shane:
Moving on.
AJ:
Moving on.
Shane:
[inaudible 00:03:08].
AJ:
I had a great Halloween party. I had a great adult Halloween party on adult Halloween, which is always Saturday night. Kids Halloween was not so great for me this year.
Shane:
Yep, yep, yep, yep. Cool.
AJ:
So, you're in Houston.
Shane:
I'm in Houston, Texas, yes. At my sister's house way down south.
AJ:
Which is where you live?
Shane:
Yes.
AJ:
If anyone's...
Shane:
Yes, dear listener. This is where I live in case the IRS is listening to this podcast.
AJ:
If any tax authorities are listening.
Shane:
Specifically, any New York state tax auditors are listening to the podcast. Hopefully, they won't. If that's how they get me, they go through the podcast.
AJ:
If that's how they get you? They listen to Liquidity Event.
Shane:
And, listen to every time I say where I am. Well, according to these...
AJ:
Where are you? What are you reading?
Shane:
... 12 [inaudible 00:03:50], you're in Brooklyn. Yeah. Yeah, busted. No, I did talk to a tax attorney about all this stuff because I am changing residency. Because, I do spend most of the year outside the country these days. And, apparently they track your cell phone records. So, the attorneys that I talked to that specialize, went to law school, have been in the industry for 25 years, was just talking to me about the various cell phone companies' ability to provide phone records to the company. He's like, "Well, all right. So, what phone company do you go with?" I'm like, "T-Mobile." He's like, "Oh actually, you're in great shape there because they've got terrible records."
AJ:
Time to get a burner phone.
Shane:
He was like, "You need to switch to another one so that you have better records that you're gone." Because, you have to prove, you have the burden of proof to them that you weren't in the state.
AJ:
At the beginning of this year, I had grand designs. I've been testing these two apps. One is called Tax... What is it called?
Shane:
Life. Tax Life.
AJ:
Tax Day and TaxBird. These are the two apps that I've been using. I've been using these since the beginning of the year, and my plan was to use them to track my whereabouts and write about it. I haven't done that yet. But, anyway, I've been tracking my days with both of these apps since January. So, we'll see at the end of the year, which one was more accurate. It'll be funny. I'll get a notification, I'll be like, "You were in Nebraska." And, when I'm flying, it'll be like, "You were in Nebraska and Tennessee and all these places." I'm like, "No, I wasn't." I was there for about 15 minutes while the 747 flew over the cornfield folks.
Shane:
Well, I hope that works out for you. I have a feeling that, just like all things, it will ultimately fall on the shoulders of Microsoft Excel...
AJ:
Yes, of course.
Shane:
... to aggregate your data.
AJ:
Oh, of course. Yes, of course. We, actually, as business owners, we have to track our days because we allocate our business income and we do actually have a Excel spreadsheet. I looked at it today and in 2022, if all my plans come to fruition from now until the end of the year, I will have only spent 43% of my time in New York City. Isn't that wacky?
Shane:
Hey, there you are. That is wacky. V wacky. Either way, you'll still be paying a lot of New York taxes because [inaudible 00:05:51] income at partnership level will be... Is that enough state local income tax chatter for the podcast this week?
AJ:
Never. Never. Never, never, never.
Shane:
Do you have an IPO update for us, AJ?
AJ:
Nothing too spicy. Just a look back on what happened last month from our lovely friends at Renaissance Capital who do a bunch of great analysis on IPOs. So, October, as I mentioned at the beginning of the podcast, October, 2022, is the worst month for the IPO market since 2011. Happy birthday to us. But, in some positive news, it was also the first month this year to produce only IPOs that raised more than a hundred million dollars. So, we've been seeing all these tiny little microcap IPOs, but really for the first time we saw some bigger players. Mobileye, the Intel spinoff, and then we had a biotech company, Prime Medicine. Those came to market and together they raised a combined big old fat billion dollars. Those stocks are doing well. So, good for our recent joinees to the public markets. Mobileye and Prime... What did I just say? Prime Medicine. Sounds like prime rib.
Shane:
I feel like the word prime is going to have an uptick in usage considering its co-branding with Amazon Prime.
AJ:
How many digits of prime? Nevermind.
Shane:
Got it. Got it.
AJ:
I'm joking.
Shane:
You can cut that out. [inaudible 00:07:21] You can cut that out.
AJ:
Anywho. Ooh.
Shane:
Fuck it, leave it in.
AJ:
Yeah. We're going live. By the way, folks, we have never edited this podcast ever. So, you get the raw AJ and Shane show, mostly because we're lazy and incapable of listening to ourselves talk. So, we never want to go back and listen. Speaking of listening to ourselves talk, some shameless self-promotion. John and I are doing a webinar, not this Friday, next Friday, November 11th at 12:00 PM Eastern. And, we are going to talk about whether it is better to rent or buy your home. We did this webinar a couple years ago and we are going to do a redux. We were just looking at our slides and there's some funny things that are the same and a lot of funny things that have changed. If you are interested in or thinking about buying a home or not buying a home, please come to our webinar. You can find more info at brooklynfi.com slash events. Hope to see you there. And, Shane, you're going to come and heckle us?
Shane:
If I am pro... I'm pro renting. So, if I do come, I'll be heckling you, who I believe is representing the purchaser.
AJ:
Well, it's not really a debate time.
Shane:
Or, do you guys mix it up?
AJ:
Yeah, we drew straws last time, so we'll see what happens. Who has to do the pro and the con? But, yeah, it'll be a good one.
Shane:
Love it. Love those webinars. You and John are great co-webinar hosts.
AJ:
Thank you. Thank you for that. Yeah, John and I are good at roasting each other. You're too mean. You always roast me and then I just get sad, and then I don't have a good comeback.
Shane:
That's what spending 15 years in locker rooms will do to you.
AJ:
Jesus Christ.
Shane:
We go a little bit harder on each other when it's 30 naked guys that have known each other for 10 years. So, sorry about that. It's hard to turn it down.
AJ:
It's all good. It's all good. Speaking of turning it down, if you are a company, a company wishing to go public on the Hong Kong stock exchange, it got a lot easier for you to do that. Lot harder for them to turn you down. How about that segue for you?
Shane:
You had me worried. It had me worried at the beginning and it looks like you landed the plane.
AJ:
Sure, sure, sure. So, Hong Kong stock exchange proposes waiving revenue requirements for some tech IPOs. This is a Wall Street Journal article. What's going on here, Shane? You did a pretty big, deep dive here. You actually had some outside analysis to share with us on what's going on here.
Shane:
Yeah. I ran into an old friend that I met five years ago before I was deep in the financial advisory space in the IPO market. I had not known back then what he did for a living. Didn't really matter. We were just traveling together. And, we remet back up in New York recently. It turns out that he has been working in the Asian IPO market for the past 20 years. Precisely.
So, over some drinks we caught up on the world. And then, just yesterday, I spoke with him a bit about this article. I didn't really... This is an article about the Hong Kong stock exchange and what's going on in the IPO space. I didn't really think it was going to be a spicy meatball for us on the podcast today until I spoke to him and realized the implications for the US market and its comparison and where we're seeing China heading in the future. So, why do we care about the Hong Kong stock... Hong Kong...
AJ:
Hong Kong.
Shane:
... stock market, which is obviously a part of China, which is part of greater China now and is becoming more and more a part of greater China since the Brits handed it back over. How is it different from the US Stock Exchange? I spoke with him about it. And, essentially, the US Stock Exchange, there are much less restrictions on who can go public. And, as long as you're regulated by the SEC, the SEC's main prerogative is providing clear and consistent information to investors [inaudible 00:11:10].
AJ:
Disclosure. It's all it's about. Right?
Shane:
Everything is about disclosure. AJ and I's companies are both all regulated by the SEC. And, it turns out that when it comes to compliance with their rules, as long as you disclose something that is nine or four fifths of the law, what's the.. Possession is nine tenths of the law.
AJ:
Right. Yeah.
Shane:
So, as long as you disclose things, then you are allowed to go public. You're allowed to provide adjusted EBITDA, as we'll discuss later on the podcast. That's the US market. Whereas in Hong Kong, they're a little bit more conservative. They're kind of old school in that there were requirements on certain... Or, on all companies, to have a certain amount of revenue and a certain amount of profit, which was restrictive. It was an old school method of... The type of companies in the old economy, so to speak, in merchandising or manufacturing or real estate, construction, agriculture, et cetera, were the ones that benefited from these rules because they didn't have to compete for capital with the new economy. Well, China, which I found interesting, and then I spoke to him about... Did you see the articles or the release of the Chinese Communist Party, like big event that they have every 10 years?
AJ:
Yes.
Shane:
Where they announce the new leaders?
AJ:
Yep.
Shane:
This one was exceptionally interesting because the Number Two was walked out of the room as Xi Jinping was consolidating his power and letting everybody know that anybody that essentially fucked with him was going to find out.
AJ:
Yeah.
Shane:
So, somebody found out. But, the other thing about those meetings, which is really interesting, is the focus on the rhetoric and the discussion that Chinese... that they go into in the CCP. Apparently, all the rhetoric around this year's conference was around stability and resiliency. These were the main themes in the conference. It's all about how China needs to focus on, not growth, but stability and resiliency.
The way that ties into the Hong Kong stock exchange is that they are looking to reduce their resilience or the reliance on the US and Europe, and really just build things more homegrown. So, when it comes to technology, they've been utilizing American and European tech. And, the new economy has largely been fostered in Silicon Valley and across the United States. But, they need to foster that technology in Hong Kong as well, or in China. What you got?
AJ:
This all makes sense because 2023, in terms of the Chinese New Year, is the year of the rabbit. And, what are rabbits known for? Stability, resiliency, multiplying quickly. Basically, it's like hunker down. Let's borrow in deep. Let's allow tech companies with less impressive revenue to enter the stock exchange. Let's just multiply really quickly, like bunnies. Let's just create multiple generations and have as many players in this game as possible, hoping that a few will survive. That's my take on this. So, it is truly the year of the rabbit.
Shane:
Well, as a year of the rabbit zodiac sign...
AJ:
Oh, you're a rabbit.
Shane:
I appreciate your appreciating.
AJ:
Wow.
Shane:
I thank you for appreciating my culture.
AJ:
Oh my god.
Shane:
No comment. No notes on your commentary. So, yeah. China is fostering the new economy and they're trying to bring them in. These revenue and profit requirements are not for all companies. They are for specially carved out companies. So, if you're an old school company, you still need to have revenue and profits in order to go public. But, if you are within specific industries such as specialist technology companies, AI, cloud-based services, advanced hardware, advanced materials, new energy, and new food and agricultural technologies, then there are lower requirements for you to get out there and grow your company via a public offering.
I guess the Chinese intent here is to stop relying on the US for chip manufacturing. We're going to talk about that here in a bit. Apparently, since our export block that we put in effect, the Biden Administration put in effect in early October, a bunch of semiconductor companies in Chinese markets are all down 10, 15%, because we're just using our soft power skills in the US to prevent the Chinese from developing military tech.
AJ:
Their market just got dried up.
Shane:
Yeah. So, this is all about the US. This is all in a response to the US exhibiting at soft power to minimize the Chinese hard power and political power over Taiwan, one of our biggest semiconductor providers, and Japan and the rest of our allies over there in the Pacific. Crazy, right? I didn't expect all of that. We got to have Aaron on, on the podcast some day.
AJ:
I know. That was a lot.
Shane:
He can expand on this.
AJ:
Yeah. Regulation is interesting because we see a lot of companies setting trends and regulations. Europe right now is setting a lot of trends in antitrust. We just saw that news about the universal charger. So, the US is... For years it was let's maintain trade relationships with everyone. We rely on China for so many things. We need their cheap goods to fuel our demand for consumerism. But, now, we're pulling back a little bit. So, what is the ripple effect going to be of the US investing in these massive companies? What's the city in New York where they're building the huge semiconductor, or the chip factory? It's like on the lake.
Shane:
I think it's Clay. Clay, New York, or something like that.
AJ:
Clay, New York. It's like the butterfly effect. It's like that one thing happens on one side of the world, like this massive shift over there. What are... What am I trying to say? Completely lost my train of thought. Pull me in, Shane.
Shane:
Well, I mean... Yeah, I got you. Well, I mean, there's a couple of things that happened that caused a rift between China and the US. Of course, the tariffs and President Trump essentially standing up to Chinese abuse of America over the years. And then, also with Covid. Everything being manufactured in China made everybody realize that we need to onshore things or nearshore things. Because, in a true emergency, China will not allow the export of certain items outside of their country. Especially when it comes to mission critical things, which is obvious. There's national security. And, with the CHIPS Act, we are now leaning towards producing our own chips within the United States. And, China is looking to produce their own advanced materials that are necessary for... I don't know, nuclear submarines, chips, aircraft carriers, all the things that go from becoming a true superpower.
AJ:
But, they're basically lowering the bar to allow more innovation. That's the idea, that companies need more funding quickly to develop this tech. Creating new technologies is really expensive. There's a lot of R&D. We've seen that in the US EV car... Luxury vehicle market. So, by lowering the bar, they recently allowed SPACS on the platform, on the Hong Kong stock exchange. So, that's going to open up a lot of... Investors have capital. They're looking for that perfect match within that short timeframe to potentially take some of these smaller, maybe it's a couple of folks in a basement with a new idea of how to create more computing power in a smaller chip. We should see that more of those companies go public and potentially compete with this now more robust US market because of all the government investment.
Shane:
Yeah. And, this is a reversal of the trend towards racing to the bottom when it comes to manufacturing things over the past 70 years. So, the hollowing out of America, so to speak, might be reversed, not by the fact that we have decided to impose tariffs on China, but the fact that China can now produce their own things and it's more expensive and we need to nearshore things for national security reasons rather than macroeconomic reasons. Kind of cool.
AJ:
Fo sho. Fo sho. Ooh, that was a fun deep dive. I just wanted to point out...
Shane:
And, we're good. Let's call it. Just one article this week, folks.
AJ:
Thanks for listening. Wait, before we do that, I was curious about the requirements to get onto the New York Stock Exchange. At the NASDAQ, there's a bunch of tests you have to pass. You have to have a certain amount of revenue and market cap. But, I just found it funny that the listing requirements to actually list on the New York Stock Exchange is basically this shitty Word document. It looks like a syllabus that I got from my freshman English teacher. The official way to list your eight figure company on the New York Stock Exchange is this little crappy PDF. So, we'll link to that in the show notes. I just thought it was funny.
Shane:
Yeah, not every company has a hundred man finance team to help them get through the [inaudible 00:19:28]
AJ:
The New York Stock Exchange should though. That's what they're all about.
Shane:
Breaking news.
AJ:
Oh boy.
Shane:
Breaking news, AJ. The feds have their meeting today and they are indeed raising rates by three quarters of a percentage point against today.
AJ:
As expected.
Shane:
Fears are confirmed. Yes. We're now looking at rates somewhere between three and 4%, 3.7 and 4%, which is the highest rates have been since 2008, when we were trying to slow down the economy ahead of that crash back then. So, here we are. Any thoughts? Any thoughts?
AJ:
On that? No.
Shane:
I'm glad you locked in a mortgage rate.
AJ:
Sure. I'm going to... Yeah, sure. I don't know. Yeah, I have no more thoughts on that. We've talked about that pretty extensively. What I...
Shane:
Yeah, ad nauseam.
AJ:
... do you want to talk about is this article from the information. The title is particularly egregious, How Money Losing Tech Firms Redefine Profits. Essentially, this is an article all about accounting standards and exactly how...
Shane:
I have nothing to say.
AJ:
Well, first of all... Yeah. Anyway, it's about companies. Basically, the articles looking at a few different companies, Rent the Runway. WeWork is one of them. Robinhood. And, I forgot the fourth. Essentially, using... The gist of this article is if you use regular accounting methods that people generally understand, which is the revenue and profit and the revenue coming in the door minus the expenses, you should have your profits. But, if you're a public tech company, you can be a little bit more creative with the way that you define expenses, and then therefore exaggerate your profitability.
Here's a quote from the article. "Using standard accounting methods, Rent the Runway lost 33.9 million in the quarter." But, according to their redefined method of accounting, which basically says that all... So, Rent the Runway, for those who don't know, it's a subscription service where you can actually rent designer clothes. You pick what you want online, they send you the clothes, you get to wear them for a few days or to an event, and then you send them back. So, you get to wear high end designer couture for 70 bucks a month or a hundred bucks a month or whatever it is. Maybe it's a little different now.
Shane:
You use it all the time.
AJ:
I used to use it all the time actually. Anyway, they're profitable, they say, according to their accounting methods, because they don't actually book the cost of those designer clothes to their balance sheet because they say it's an investment. So, if they're going to buy a Dolce & Gabbana couture dress that's going to cost them at wholesale probably, I don't know, a thousand dollars and then they're going to rent it to you, that thousand dollars expense is actually not showing up on the balance sheet. That's the creative wizard accounting that they're doing. What do you think about that as an accountant, Shane?
Shane:
Am I still an accountant? Yeah, I'm still an accountant. You can still...
AJ:
Yes. I hear you self identify as an accountant at least three times a day.
Shane:
Just because it's the easiest thing to say.
AJ:
As an accountant...
Shane:
... when people ask me what I do. We all have to remember that accounting is created by humans. It's a human construct. There was no accounting in the universe before we came along as humans and created this. So, there is no universally accepted definition for revenue or expense, like there is for the number four.
AJ:
Aren't they generally accepted? Isn't there a funny term for... Isn't GAAP...
Shane:
Yes.
AJ:
... generally accepted. Like woo.
Shane:
As opposed to... Very important point, AJ, as opposed to universally accepted accounting principles.
AJ:
Yes. Yes.
Shane:
In the United States we have what's called GAAP. GAAP accounting is generally accepted accounting principles. And, that's when...
AJ:
Two A's in that. Not the nineties jeans brand. G-A-A-P.
Shane:
Right. But, just as cool. Well, 30 years ago. So, we have a bunch of accountants sit in a room, they used to do accounting for industry, for companies in the past. What they do is they sit around and they say, "You know what? What is the definition of revenue?" If I have a contract that says, "You pay me over 12 months," do I recognize all that revenue now, today, on the financial statements? Or, do I spread it out over 12 months? That's the easiest example of them trying to grapple with the definition of revenue. It's a bunch of essentially lawyers. And, they define revenue, they define expenses, and there's a bunch of other things that they define, including capitalized assets.
I bring this all up because I think what Rent the Runway is trying to do is say that they have a different definition of expenses for their dresses. There really is a lot of complaining in the accounting community, or at least in the newer accounting community, about the way that we treat these new economy companies, like circling back to what we were talking about with China. The accounting that we have today is designed for manufacturing and real estate companies. It is not designed to capture the value of recurring revenue of your...
AJ:
Subscription, or fast companies.
Shane:
Subscriptions, yes.
AJ:
Anything where they're not actually selling a product with inventory. If you look at a business tax return, a lot of it is related to inventory. And, very few of our clients actually have inventory that they track. There's so many. If you're a business owner and you try to do your own tax return, you will be shocked at trying to fit your expenses into the categories that the IRS recognizes. Your website expenses, which is a common expense that most people have, the IRS doesn't have a category for website expenses. They have a category for advertising or others. So, you have to figure out what you're going to put it in. I'll just say that the system is designed for one very specific type of company.
Shane:
Tangibles.
AJ:
Yeah.
Shane:
It's designed for tangible stuff. And, when a company like Rent the Runway designs intangible things such as the software that they develop, their customer list, et cetera, most of those things are written off instead of capitalized and depreciated over time. What happens with a building is, when a company builds a building, that's not an expense. All that construction that goes into it, if they spend a million dollars building a building, it goes on the balance sheet instead of the P&L.
What I think Rent the Runway is doing is trying to treat themselves more like a old school company and saying, "You know what? We have all these dresses that are going to last multiple years, and clothing is typically written off immediately. But, we're not like all those other companies." So, yes, we have regular EBITDA that says that we lost ton of money. But, at the end of the day, because the SEC allows us to disclose all this other information because that's what the SEC's all about, we have adjusted EBITDA that we want to provide to the folks that actually get it. Those that don't understand the new economy, this is what adjusted EBITDA looks like and it's much rosier. And then, the old chairman of the SEC...
AJ:
Real life example here. When I was reading these articles, I was like, "Eh, that's bullshit." But then, I remembered that last year I purchased a already rented and used Marni handbag from Rent the Runway. So, they actually did. That was an asset that appreciated and they were able to sell it to me.
Shane:
There you go.
AJ:
So, it was fine.
Shane:
Yeah. I mean, that's what we got to keep in mind is that revenue and expenses are subjective things. I mean, obviously, there's GAAP which goes onto financial statements, and if we don't use GAAP, then our companies will get fined and penalized. But, the adjusted EBITDA is where we get to be a little bit sexier and talk about the future. Another takeaway that I want to remind people of is that all this stuff in the financial statements are things that you're not reading when you're picking stocks.
Only the trillion dollar hedge fund managers and money managers are actually reading these exceptional other disclosures and being able to read between the lines and understanding GAAP, and also adjusted EBITDA, and then making more informed decisions about where this company is going and the value of that company. So, it's all the much more... They don't even do that well when it comes to picking stocks. They're essentially a coin flip. So, if you think you can pick stocks better while sifting through the adjusted EBITDA of Rent the Runway, you have to admit to yourself that you're just going with brand and how you feel about that brand and if you see your friends wearing it, et cetera, and the story of the stock.
AJ:
Yeah. Let's look at a few other examples though, because it's not just this clothing example. For example, Robinhood excluded more than 900 million it had to pay regulators in fines, as well as a two billion charge the firm took after it issued securities to investors to raise emergency funding when it was still privately held. So, Robinhood, on its year end financial statements did not count the two billion dollars.
Shane:
They call them extra extraordinary events.
AJ:
Oops.
Shane:
Those are extraordinary. Those are outside of normal ordinary events.
AJ:
Yeah, exactly. So, should we say that because Brooklyn FI grew faster than we thought, that we had to hire 10 people this year, that was an extraordinary event and we shouldn't count it as an expense? Why not, right?
Shane:
I don't... I have enough things on my plate. I don't have to worry about GAAP. And, 10K filings with the SEC, please move on.
AJ:
One last point on this, which is I think much more common and just already accepted, is that stock compensation. So, excessive bonuses paid in the form of stock to executives is often not disclosed as an expense for some of these newer companies. Like, hey, CEO, CFO, COO, you took the company public. Here's a 10 million or a 50 million dollar bonus in stock. Well, that's an extraordinary event. That was a one time thing. We don't need to report that. That shouldn't impact the value of our company. That's just a necessary evil of going public. Great article, by the way, folks, if you're interested in IPOs at all. I was salivating on this.
Shane:
The most iconic of adjusted EBITDA was WeWork's S1 filing that included community adjusted EBITDA, which is the one that got [inaudible 00:29:01].
AJ:
Which is like [inaudible 00:29:02].
Shane:
... took a wood chip or two, and prevented that company from going public. Was that like five years ago now?
AJ:
2001. Not 2001. Jesus. 2021.
Shane:
[inaudible 00:29:13].
AJ:
Almost.
Shane:
What year is it?
AJ:
Was that pre-Pando? Yeah, it had to be right. 2019.
Shane:
For sure.
AJ:
'19.
Shane:
Yeah. It was '18 or '19.
AJ:
Yeah. Wild.
Shane:
Yeah. We've got no time left. What do you want to do? You want to read us out?
AJ:
Yeah, let's do it. Thank you for listening to the Liquidity Event. You can always email us at liquidityevent@brooklynfi.com. You can leave us a voicemail and we will play it on the air. The show notes for this show can be found at brooklynfi.com slash episode 66. BKFI stands can leave us a review if they want to be weird about it. Thanks for hanging with us, folks. We'll see you next week.
Shane:
Everybody, have a nice weekend and speak very softly to your friends and your mothers and your sisters and your [inaudible 00:29:56]. Bye.
Speaker 2:
Thanks for listening to the Liquidity Event, hosted by AJ and Shane of Brooklyn FI. Head on over to brooklynfi.com where you can subscribe to the podcast or YouTube channel. Or, if you want to learn about their full service, financial planning, tax, and investment firm specializing in tech professionals and creatives on the path to financial independence. We'll see you next time on the Liquidity Event.