Tag: stock

Will Verbit Go Public in 2022?

Verbit’s constant attraction of investor money and recent acquisition of VITAC has set off a few optimistic waves in the media. Verbit bills itself as a unicorn, that is, a startup with a valuation of over $1 billion. Court reporters worried about that kind of classification should be aware that it means nothing. Fyre was set to be a unicorn, and yet Billy McFarland’s venture did little more than light Fyre’s investors’ money on fire and land him in jail. Theranos was valuated at $10 billion. It’s now worthless and Elizabeth Holmes may face jailtime. Powa was a unicorn with a valuation of $2 billion. That didn’t work out either.

I was shocked to come across an article that states that there are hopes of Verbit becoming a publicly-traded company by 2022. Ignoring things that the article gets incorrect, such as the firm being Manhattan-based (other articles state it’s an Israeli company), there are few reasons I can see for Verbit to become a publicly-traded company. Becoming publicly traded would allow investors to see the profit or loss. To give a great example, VIQ Solutions, parent of Net Transcripts, is publicly traded. It loses money every quarter despite reporting revenue in the millions. Companies that lose money aren’t attractive to investors and that’s why VIQ is about $7 a share today. Remaining private allows companies to continue a kind of “shell game” and operate despite being unprofitable. Based on Livne’s broadcasting of Verbit’s revenue and silence with regard to profit, I suspect Verbit would have the same exact problem, lots of revenue and little or no profit.

Going public would serve only one purpose in my view, an exit for current investors. Current investors could make a big deal about how it’s a company valuated at over $1 billion sitting “on top” of a market that’s allegedly worth $30 billion and watch as new investors dive in and take the bait. In the article above, Livne states the funding rounds were over-subscribed. That means they had a lot of money poured on them in their funding rounds that they did not need. If they’re over-funded, going public clearly wouldn’t provide the company with funds it needs — remember, it’s overfunded — again, it would give the current investors an exit. They get to cash out, some suckers get to buy in, and what happens after that is anybody’s guess. It remains a little strange to me that journalists buy the idea that a company that is maybe half a decade old has automatic speech recognition technology that is better than basically all the major players in the market. Those major players, according to one study, have accuracy levels between 25 and 80 percent.

My prediction is that Verbit will either fail to go public in 2022, or it will go public and take a hard fall sometime down the road after Livne and other investors have cashed out. I sincerely hope it’s the latter, because at least it would be a happy ending for the founder. Verbit finds itself in a precarious position of being a large target for the IRS. In the United States, one is a common law employee when the “employer” has direction and control. Verbit, according to the linked article, is using 30,000 freelancers to carry out its business model. If Verbit does not have direction and control, it cannot assure quality. If it does have direction and control, those are 30,000 employees it is failing to withhold taxes for. Like other companies that rely heavily on independent contractors, Verbit may soon find itself under attack from federal and state tax authorities where it conducts business or earns income. Anyone in the world can confidentially file a form 3949-A that puts Verbit under the spotlight, and that can only translate into headaches for the company and its investors. With that kind of exposure, I would not be investing in the company any time soon.

Even in a world where authorities turn a blind eye and there isn’t a decline in the company’s financial health, Verbit moving public could only give its competitors more information, which is something I’m looking forward to.

Meanwhile, back at Stenonymous HQ, an important meeting with my board of directors.

Holding Companies Explanation

One of our readers reached out to me recently with a really interesting and important question. I took some time to answer the question personally but I’d really like to make sure everyone can be on the same page. In my experience, if one person has a question, ten people had the same question and didn’t ask it yet.

The reader asked: How can Diamond sponsor a NYSCRA event when they were bought by Veritext? Great question. Basically I would break it down like this: When you create a corporation, the state grants that corporation, or the corporation’s founder(s), stock or some form of ownership. When a company buys another company, it becomes a holding company or parent corporation. The company being bought is generally referred to as a subsidiary corporation.

So the subsidiary company still exists as its own company and is free to make its own choices as to what to support. The holding company technically has power over it, but doesn’t have to interfere with its day-to-day operations. The two companies both exist, at least until the holding company dissolves legally or the subsidiary company dissolves legally.

Notably, I have read that Veritext itself is owned by a private equity firm. That’s more or less a company that invests in companies and tries to flip them for profit or sell them out on an IPO, taking the stock from private to public ownership, and hopefully for them getting a payday on their investment and exiting.

I do not know if Diamond made the decision to sponsor the event independently or if Veritext gave them permission, but regardless, we’re always happy to see corporations put some time or money into stenography. As harsh as our opinions can be here on Stenonymous, we do acknowledge the value that corporations have and their place in industry. Many of them may yet show themselves to be huge allies, and hopefully every time they do readers will come out and say hey, you need to acknowledge XYZ. At the same time, we will not hold back from calling agencies out when they’re working against stenographers.

Thank you readers! You help me write with every question or correspondence. On that note, if you have information or documentation related to steno news, feel free to write me at ChristopherDay227@gmail.com.

NCRA just made a really awesome announcement, so look out for that article Monday!