The interest rate hike in the USA by the federal government caused this. The companies can’t borrow money for nearly free any more. All the entities who would have been offering these loans are now able to buy government bonds with a much more guaranteed return on investment. This means the corporations must squeeze more profit out of their products to pay back loans. There are an enormous amount of large money transactions like this used to run a large business. They do not operate on cash reserves all the time. They have assets and are always evolving to stay relevant. Most businesses have enormous asset holdings but limited liquidity.
There is a significant change in investment climate since the beginning of the year.
Before you could basically get another round of investments very easily even without being profitable as central banks were lending money for free more or less. This meant that the current VC investors could usually find a bigger fool to offload their investment to.
However now the few remaining new investors actually want to make a return of investment from the company itself and not just artificially pump it up further to find another buyer for their exit. So the current investors are putting a lot of pressure on these companies to appear profitable no matter what so that they can exit their investment.
That makes me wonder if someone else would pick it up in an asset sale and keep it running (from the users’ point of view). That doesn’t necessarily solve the revenue problem, but it does shed debt that would have to be serviced, which would reduce costs, which would increase the bottom line.
There’s also a clampdown on venture capital happening now. Investors are getting tired of waiting indefinitely for returns on over-valued media companies. For any running in the red, things are going to get tight. That means layoffs that result in lower quality service and more burden on users for revenue. Social media has never been a profitable and sustainable corporate enterprise.
The interest rate hike in the USA by the federal government caused this. The companies can’t borrow money for nearly free any more. All the entities who would have been offering these loans are now able to buy government bonds with a much more guaranteed return on investment. This means the corporations must squeeze more profit out of their products to pay back loans. There are an enormous amount of large money transactions like this used to run a large business. They do not operate on cash reserves all the time. They have assets and are always evolving to stay relevant. Most businesses have enormous asset holdings but limited liquidity.
This best answers the OPs question. We know why it happens in general, but this is why everything is doing it in overdrive right now.
I also think Spez is trying to rush into an IPO before the bottom truly drops out and the company folds.
There is a significant change in investment climate since the beginning of the year.
Before you could basically get another round of investments very easily even without being profitable as central banks were lending money for free more or less. This meant that the current VC investors could usually find a bigger fool to offload their investment to.
However now the few remaining new investors actually want to make a return of investment from the company itself and not just artificially pump it up further to find another buyer for their exit. So the current investors are putting a lot of pressure on these companies to appear profitable no matter what so that they can exit their investment.
That makes me wonder if someone else would pick it up in an asset sale and keep it running (from the users’ point of view). That doesn’t necessarily solve the revenue problem, but it does shed debt that would have to be serviced, which would reduce costs, which would increase the bottom line.
There’s also a clampdown on venture capital happening now. Investors are getting tired of waiting indefinitely for returns on over-valued media companies. For any running in the red, things are going to get tight. That means layoffs that result in lower quality service and more burden on users for revenue. Social media has never been a profitable and sustainable corporate enterprise.