Can't LMG just get a loan to finance their new real estate purchase?

[starcar]

Last WAN show Linus said they need 10 million $ to buy a larger "workspace". He even considers an IPO to do this. What I don't get is why can't he just get a mortgage? It's not like 10 million is just for the down payment, right? Right?

[danomicar]

In order to do that, they need to find a lender willing to give them that much at a reasonable cost. They may already have debt outstanding which can drive the cost of additional debt up. 

[QuantumSingularity]

Content creation isn't a solid stable business model. It's risky AF. There have been many channels, even bigger than LTT who also had their own platforms and who failed spectacularly after a certain amount of time. I can't be certain how it is in Canada, but will safely assume that no bank would risk that amount of money w/o a solid insurance. Industrial real estate isn't like living. If you mortgage a house and can't pay for it, it still holds most of its value (or could even have marked up) and there always would be someone interested in buying it. With industrial and commercial spaces it's not like that. It could be years before someone is interested in the "high-tech" warehouse you have to offer them outside the city limits and rest assured they will try to negotiate a price WAAAAAY lower than what you need. Even if you get ownership over the hardware that was invested, well we all know how well old hardware holds its value. That $36 000 worth of HDDs on the new vault would be half of that in 6 months time (unless something drastic happens to HDD market like it did back in 2011 or now with the GPUs). I tried to start my own IT company 2 times already and 2 times it flopped hard. On the business side of the things, IT is the worst sector to develop in. This week you make money like mad, next week you are struggling to keep afloat and this is even w/o making risky decision. 

[BlueChinchillaEatingDorito]

15 hours ago, starcar said:

Last WAN show Linus said they need 10 million $ to buy a larger "workspace". He even considers an IPO to do this. What I don't get is why can't he just get a mortgage? It's not like 10 million is just for the down payment, right? Right?

Why don't you go to your local bank or credit union to find out? Clearly real estate in the Lower Mainland of BC is cheap. 

[Needfuldoer]

On 2/12/2022 at 11:38 AM, danomicar said:

In order to do that, they need to find a lender willing to give them that much at a reasonable cost. They may already have debt outstanding which can drive the cost of additional debt up. 

And they would have to carry the new mortgage on top of the mortgages or leases they have on the spaces they already occupy, until they're completely moved and can either not renew the leases or sell the property. (Early termination fees on commercial leases can cost more than just riding the end of the lease out, depending on timing.)

 

If they're leasing, and that crossover time covers one of their leases ending but they still need the space, they'd have to either re-lease for another term or negotiate a short-term rental agreement. This can be far more expensive per month than 1/12 of an annual lease.

 

Commercial real estate is a big-money game.

[Arika]

You speak like a business taking out a $10mil loan is the easiest thing in the world.

 

Considering they already have a huge office which spans multiple units, and the newly acquired ltt labs space, which they still need to outfit with equipment and staff and start producing content.

 

now probably isn't the best time to take on massive debt.

[Zodiark1593]

Slow, steady growth is something LMG has been doing right. They don't need to leverage to accelerate growth, and in fact, excessively fast growth can be fatal to unprepared businesses, owing to difficulties in rapidly scaling up everything else to keep pace. Unlike when LMG was still new, the stakes of failure are a lot higher, and pursing a risky venture for the sake of some extra growth is not a prudent move when so many employees rely upon LMG.

 

To be clear, there are times and places that risks must be taken to move forward, or are otherwise highly worthwhile for everyone involved, however, you should have a really good reason to pull the trigger.

[lewdicrous]

16 hours ago, starcar said:

What I don't get is why can't he just get a mortgage?

"Why don't homeless people just get a home?" - This is what it sounds like.

[Roswell]

They’ll never do an IPO, way too many conflicts with the regulation that would follow.

 

His conflict of interest with framework presents a problem, their poor behavior with properly disclosing external money and benefits from advertisers would need to drastically change, their complete lack of diversity outside of white and Asian hires would need to be justified to shareholders and the public under those new disclosure laws, etc etc.

[starcar]

you guys are ignorant. Linus debunked all of your arguments on the last wan show (not those in regards to the feasability of a loan)

[starcar]

Recap: Linus mentioned him needing 10 million CAD to finance a larger "workspace" he is already considering an IPO. 

Let's brainstorm to come up with ways that he could do this. I'll start he could come up with the funds partially trough a kickstarter.

 

Please no jokes or memes or other unconstructive blabbering also don't pollute this thread asking why he needs this or what it is all about just watch the last WAN show.

[Somerandomtechyboi]

12 minutes ago, starcar said:

I'll start he could come up with the funds partially trough a kickstarter.

thatll cover at most 0.5-1% of the cost

[crazzp]

1 hour ago, Roswell said:

their complete lack of diversity outside of white and Asian hires would need to be justified to shareholders and the public

You can spot a Linus hater from a mile away. lol how about try googling Vancouver demographics. Having 'complete lack of diversity' and 'outside of white and Asian hires' in a same sentence is just pure contradiction. Didnt know you can just happily exclude Asians as part of diversity now

[StalePie42]

They should partner with European clothing brands to sel more merchandise outside of the US

[starcar]

26 minutes ago, StalePie42 said:

They should partner with European clothing brands to sel more merchandise outside of the US

This is probably bad in the long term but maybe he could sell the lttstore and the license to make ltt branded merch for a few million.

[da na]

2 minutes ago, starcar said:

This is probably bad in the long term but maybe he could sell the lttstore and the license to make ltt branded merch for a few million.

The issue is, no large brands would want to make LTT store merch...

[starcar]

13 minutes ago, Mel0nMan said:

The issue is, no large brands would want to make LTT store merch...

No I'm not talking about large brands with a repuation. But something like a foreign Chinese investor trying to get a foothold in the influencer merch market. Obviously there has to be some guarantee that they would not damage the LTT brand

[Skiiwee29]

@starcar I have merged your threads together. Please keep the same/similar topics to a singular thread. 

[Needfuldoer]

9 hours ago, Zodiark1593 said:

Slow, steady growth is something LMG has been doing right. They don't need to leverage to accelerate growth, and in fact, excessively fast growth can be fatal to unprepared businesses, owing to difficulties in rapidly scaling up everything else to keep pace. Unlike when LMG was still new, the stakes of failure are a lot higher, and pursing a risky venture for the sake of some extra growth is not a prudent move when so many employees rely upon LMG.

Over-expansion is absolutely a concern. A prime example is Ames, a now-defunct department store from the northeast USA. They bought out one competitor, went through bankruptcy restructuring, bought more competitors, became the #4 discount department store in the US for a brief moment, then spectacularly crashed and burned.

 

LMG already has millions tied up in R&D for the backpack and screwdriver, plus however much it's costing them to build the Labs. (Between leasing and renovating the space, I bet it's easily six digits even before personnel costs.) Once those projects bear fruit and have proven cash flow, they'll be in a better position to re-evaluate their real estate holdings.

[TheGreatestGazoo]

NCIX over-expanded. They added a bunch of stores in Ontario and stretched out too thin no longer able to pay suppliers.

[cmndr]

On 2/13/2022 at 2:07 AM, Roswell said:

They’ll never do an IPO, way too many conflicts with the regulation that would follow.

 

His conflict of interest with framework presents a problem, their poor behavior with properly disclosing external money and benefits from advertisers would need to drastically change, their complete lack of diversity outside of white and Asian hires would need to be justified to shareholders and the public under those new disclosure laws, etc etc.

I "like" how the current sociopolitical environment simultaneously considers stereotyping bad while implicitly acting as though all Asians are the same.


As an FYI, it looks like LMG isn't too far off from the general vancouver population
https://worldpopulationreview.com/canadian-cities/vancouver-population
 

Quote

• European Canadian: 46.2%
• Chinese: 27.7%
• South Asian: 6%
• Filipino: 6%
• Southeast Asian: 3%
• Japanese: 1.7%
• Latin American: 1.6%
• Mixed visible minority: 1.5%
• Korean: 1.5%
• Aboriginal: 2% (1.3% First Nations, 0.6% Metis)
• West Asian: 1.2%
• Black: 1%
• Arab: 0.5%

 

Using UBC's demographic info from a decade ago as a proxy for high quality talent in the area...
https://ctlt.ubc.ca/2012/08/15/who-are-our-students-implications-for-teaching-and-learning/
 

Quote

According to the 2011 survey, 37% of incoming students consider themselves to be Caucasian and 37% consider themselves to be Chinese. Although UBC is thought of as very ethnically diverse, Carol points out that there is a “misconception that diversity only comes from the international students.” Proof of this point is that 45% of all domestic students are Chinese, Japanese, or Korean, and only 51% of domestic students’ first language is English. In fact, many domestic students have a similar experience at UBC to international students because both are using a language different from the one they use at home. The demographic of international students is only slightly different than domestic students, with 44% being Chinese, Japanese, or Korean and 37% speaking English as a first language. In addition, 19% of all international students come from the US, followed closely by China at 15%.

So yeah... LMG doesn't have the same demographic makeup as Texas or California. That's OK.

Also, the proper comparison group would be the talent pool with relevant skills and interests among working age professionals in the area, so... yeah. Trying to make LMG look like Texas or California or New York is questionable.

 

[Heliian]

On 2/13/2022 at 12:31 PM, Needfuldoer said:

millions tied up in R&D for the backpack and screwdriver,

Uh what?  Is that true?  I don't see that being possible.  

[Needfuldoer]

2 hours ago, Heliian said:

Uh what?  Is that true?  I don't see that being possible.  

This from a live stream from a while back, but I think Linus was talking about how they had to walk away from a $400,000 $140,000 USD non-refundable deposit with one parts manufacturer after their timetable kept slipping further and further. (They were also bought out by a tool manufacturer, and the contract had no drop-dead end date, so they had every incentive to kick the can forever and zero incentive to actually make LTT screwdrivers.)

 

He said they were invested into both the screwdriver and backpack to the tune of $5 million USD 'seven figures' at that point, so walking away from the $400,000 $140,000 hurt but it wasn't as big a hit as it sounded in the long term because it's amortized across a 100,000 unit production run.

 

Can't find the clip right now though, so I might be misremembering. If I find it, I'll throw a link in this post.

 

Found it! (Start around 10:30)

 

 

Edited February 15, 2022 by Needfuldoer
Found a primary source for the figures I kind of remembered.

[Heliian]

1 hour ago, Needfuldoer said:

screwdriver and backpack to the tune of $5 million USD at that point

Holy shit I had no idea.  That seems like a tax write down plan.  I can't think of any other reason one would dump that much into 2 swag items. 

[Needfuldoer]

Found it! It was in the recent budget build stream, starting around 10:30 in:

 

https://youtu.be/lOBaA9zg3XM?t=628

 

I mis-remebrered the amount of the deposit, he says $140,000 USD not $400,000 USD. Not sure where I got $5m from (maybe another stream that had a preproduction backpack in it), but he does say just the screwdriver project is "seven figures". That lost deposit is still "only" $1.40 per screwdriver, because they're aiming for a 100,000 unit production run.

 

Short production runs and iterating prototypes is a lot more expensive per unit than a full run.