this post was submitted on 30 Jun 2023
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Because it's a lot easier to find someone who thinks they can do it than it is to actually successfully do it yourself - as we are currently seeing with how wonderfully incompetent Spez is with Reddit.
When Yahoo bought Tumblr for $1.1 billion in 2013 - only to sell it for $3 million in 2019 - was Tumblr bringing in millions and millions of profit? No. But Yahoo thought that they would be able to make it.
Elon Musk paid $44 billion for Twitter, it hasn't turned any profit either (and never will enough for him to get his moneys worth, but that's just because Musk is an idiot).
But yeah, quite often it does feel like a scam. Or kinda like... gambling? You hope someone will pay a lot for your company, while they hope they can make it turn wildly profitable, both may or may not come true.
That's pretty much what I said, though. That's the core of the scam. You sell something you know to be worthless to someone too ignorant to understand that. Maybe I'm just extremely ignorant and naive in matters of business, but selling a fake company like that seems no different than selling pyrite to someone who can't tell it apart from gold.
You're basically assuming that the company can't be made to turn a profit, in which case, yes, it would be a scam.
But that's not the case. The company could potentially be made to make a profit, and you're basically selling that potential. It often works out, like in the case of Amazon. Sometimes it doesn't, like Yahoo buying Tumblr.
As long as what the prospective buyer is actually getting is clear and up-front, it can hardly be a scam. With your "You sell something you know to be worthless to someone too ignorant to understand that.", you're essentially assuming the company can't be made profitable, and that the seller knows that, but doesn't disclose it to the buyer, and that the buyer is somehow naive enough to not be able to tell.
It's generally unlikely that a company can't be made profitable, it would be unlikely for the seller to know that, and it would be unlikely for the buyer to be unable to find out before buying it, which altogether, makes it unlikely this would happen. Which is why it's big news when it does happen, like with Theranos (Which was eventually found out)
If the company can be made profitable, why isn't it? Why wouldn't the current owner rake in some profits before selling? Surely a company that is already profitable would be even more attractive for buyers.
Because it takes time to get that potential.
The sellers want money now, while the buyers are okay with waiting.
Reddit has been around for 18 years, though. Surely that's more than enough time to start turning a profit if the company is capable of it?