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One arrogant mother fukker.
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Replies: 38
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But would you offer him 15% for £70,000?
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Peter is looking very old, all of a sudden. Has he been ill? Though I see from Wikipedia he is 51, which might explain it.
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I admire all of them.
They can do what most of us can't do, but wish we could. |
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He just tells the truth in his opinion , mostly kindly but sometimes rudely, nobody died....
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match up ur socks man
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Though they gave 1 guy a hard time with the finances when in fact he was right and they were wrong.
He offered 50% of the business for £600k, the business was worth £600k. Now as he said that money goes back into the business not into his pocket, which then makes the business worth £1.2m. The £600k it is already worth plus the £600k invested. Though the guy didn't explain it very well, but amazed they all laughed at him. They claimed that it should only be £300k for 50% of the business, which is right if he was pocketing the cash not re investing the cash. If I was buying 10% of a company shares which was worth £100k it should cost £10k. But if I was investing in a company putting in £10k and the company was worth £100k, that makes it £110k business and therefore 10% of it is worth £11k. Amazed not 1 of the dragons understood this. |
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That was all a bit badly explained, wasn't it.
I think it's because he didn't have a home for the extra £600,000 or any plans to use it. But it wasn't that unreasonable, I thought that too. I don't see the dragons put big sums into businesses very often. It's usually £50K for 30%. Quite an easy punt for a multi-millionaire imo. |
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The company is valued on its profits and future prospects, adding capital does not increase either in itself.
So they would be buying £300k worth of a business, but paying £600k for it. |
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He didn't explain it well, but I understood what he was saying, and he was right.
The Dragons should also have known that if the money was being re invested the value of the company would be increased by the investment. Even if he didn't have a home for it, he did explain it was the company's money not his own. It really amazed me none of them grasped it, I would have thought it is only simple maths and something they do constantly. |
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loike in the case of the last psair dragons didn't get where they are by giving 18% of a company away for peanuts,they only wanted 70 grand bertween 2 families ,friends etc,its not a huge sum,they all just think by having a dragon on board its a done deal,where in reality its the idea,plan etc that will eventualy succeed or fail not a dragons name,think the dragons have passed on 7 or 8 multi million pound companies in the last 3 years,not as clever as they think they are, I no its all for tv but once you no 5 dragons are willing to back you in the real world you,d say thanks but no thanks,was just checking if you,d like it,
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Dr it wasn't the valuation, that may have been right or wrong. They never said the valuation was wrong (which it may well have been).
They argued that if it is worth £600k they should only pay £300k for 50% and mocked him for not understanding this simple concept. But he already said the £600k would be the companies not his. He explained it as he puts in a £600k company, they put in £600k cash, so they both own 50%. That is correct, they laughed at him. Whether it was worth £600k on profits/assets is another matter and 1 which the dragons didn't go into. |
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What colour is his hair these days?
Same as Dunc's? |
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If a company is valued at £600k how much would you have to pay to buy the company, £600k obviously, but that cash is lost to the business as it goes in the pocket of the seller(s).
Looking at it like that you do have to say that the guy has a point. |
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To be fair getting £600k off a stranger for an investment is extremely tough however you pitch it.
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Especially when £300k of it is for pie in the sky.
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I agree with maleuk, but doubt the dragon's are ingnorant, rather playing ignorant because it suits their interests.
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By paying twice what half the company is valued at, what would they be getting for their other £300k?
What kind of a businessman strikes deals on those terms? No wonder they laughed him out of the den. |
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The fault is with the guy asking for the investment. If you make it so convoluted that people can't immediately see what they are paying for it indicates muddled thinking on his part. This is not a multinational this is one guy selling metal cabinets.
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Maybe I've missed something, but surely any valuation is largely based on profit history.
So pumping an extra £600k in to the business does not double its value, simply because it doesn't (necessarily) double the profits. For example, what if the profit history was based on an exceptional marketing spend a few years back, which now needed to be redoubled. A lot of the £600k might be burned pretty quick and will no longer be a cash asset? |
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Business valuations are complex, and a judgement but shoving cash into the bank and crediting equity doesn't make it much more valuable
As cashflow (lack of) is main cause of business failure, increasing cash at bank could be considered as adding some value, ie reducing the risk of failure. |
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doantwin2easy, if the value of £600k for the business is correct which takes in assets/profitability etc etc then adding £600k of cash does double the value of the company.
However the value of £600k may have been way of the mark, they never argued that. |
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It might have been worth £6k in which case the £600k would've increased it's value by 100 times. A business making no profit but with £600k in assets is worth at least £600k
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net assets obv
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I don't think the guy made it convoluted. Seemed pretty simple to me. But they've done this show for 10 years now? and they are hardly going to admit they've been wrong all along, whether they can see it for themselves or not.
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Assets less liabilities is capital. Part of that capital can be equity.
Simple example. I 'open' a business and put £20K in the business account, so I can buy stock. Journal is Debit Bank 20K, Credit Equity £20K. The business is worth nothing. It owes me £20K. |
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It's like going to the bank and asking for a loan.
Then when the bank asks for some security you tell them ''I'll have plenty of security after you grant me the loan.'' It don't work like that folks. |
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It's not like asking for a loan. With a loan you don't own any of the business.
In Cider's example as you own the business in its entirety the £20k is yours because the business is yours anyway |
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If in the £600k example the bloke was going to walk away with the £600k in exchange for 50% of the business then it would be valued at £1.2million. That is how FTSE companies are valued and when you sell your shares you take the proceeds.
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Wasn't on about Ciders last example.
I would have thought that investing £600k for a return from £300k is poor business in anyone's book. |
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not in money tree creative accounting
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If in the £600k example the bloke was going to walk away with the £600k in exchange for 50% of the business then it would be valued at £1.2million. That is how FTSE companies are valued and when you sell your shares you take the proceeds.
So prior to any IPO, a capital injection to the tune of 100% of the current market value of a business, immediately doubles the valuation of that business? Regardless of the business model, profit history, burn rate, market conditions etc? So anyone can potentially inflate the monetary value of their business by investing capital, with limited trading history, which is then realised in the equity value of their IPO (or private investment as in this case)? Surely investors invest, based on profit history and projections, so how does investing capital double the value of a business unless you are 100% confident that the doubling of the cash will double the profits? I still don't get it. |
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At least double the value. If they were asking for an extra £600k (say in a rights issue) the premis would be that the £600k invested would be worth more invested in the business than sitting in the bank earning interest. If the business had no good use for the cash it would pay it back to shareholders (which sometimes happens, for example when part of the business is sold off) If it pays it back it's obviously worth £600k
What you are possibly not getting in this hypothetical example is that while the business is currently valued at £600k that doesn't mean it has £600ks worth of assets. In practice it may have only £200ks worth and its valuation of £600k is based on it's potential. If it was valued at £600k and has realisable net assets in excess of over £600k it would be undervalued and be better off being disbanded and the assets sold off and returned to shareholders. That was the premis behind Richard Gere's character in Pretty Woman. |
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I seem to have a vague recollection that in the not too distant past that someone was making the case that either Labrokes/Corals/WilliamHill, forget which, were insolvent in that their loan liabilities exceeded their tangible assets. The valuation being based on potewntial profits from intangibles such as their brand and customer base.
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If you removed the intangibles from most FTSE companies they would be technically insolvent.
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The example here is not a listed company, and it's not capitalised on the value of it's shares.
So the claim of doubling its value by the investment is not valid along those lines. The value of a tiny business can be estimated on far more tangible things than simply using a share price. And paying double what a company is worth, on the say so of your future partner that he won't take his cash out is ludicrous. When the reason for going to the den for cash, is to invest the money secured in the hope of increasing growth. |
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Sorry to be a bear with a sore thumb but I agree with Dr C.
A capital injection into a business with no public accountability, without the grandeur, trading history or customer base of a Ladbrokes, could very quickly go down the pan. So I can't see how doubling the capital doubles the value. |
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maleuk was pointing out what the guy was valuing his business at, which was £600k, and which was correct. Whether the business was worth investing £600k in is another thing entirely
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Peter Jones - one smart phucker ...
8 Mar 2009 - Dragons' Den star Peter Jones has been caught up in a VAT clampdown by tax authorities. ... The tough-talking entrepreneur, who gave business advice to Gordon Brown four months ago, has faced big delays in recouping VAT payments to his mobile phone wholesaling company Phones ...  |