The hedge fund people suddenly have issues with the product we showed them. Things had gone spinningly in the presentation, but now they seem to have some kind of strange set of technical issues. There is a lot of back and forth between Armin's highly placed friend, me, Dave and the technical team at the hedge fund.
Now things don't look particularly good.
This would be a bad strike for Sinister and, if the early concerns of the hedge fund's technical team pan out, it would imply that the primary product Sinister, and therefore we, had hung its hopes on could be worthless.
It never ceases to amaze me how Ph.Ds can disagree about technical details. These are supposed to be statistical conclusions. We can argue forever about the conclusions themselves but being unable to agree fundamentally on the data and the calculations used to get there is like taking contrary positions on whether 2 + 2 actually equals four. Or so it seems to me.
If the two teams cannot come to some common ground quickly it probably means one of two things:
1. The hedge fund team is calculating something wrong, there is actual
value in Sinister's product but they are looking in the wrong place for
it.
2. Our team is calculating something wrong, there is zero value in Sinister's flagship product.
Of course, option #2 would be a dire consequence for Sinister. It also, based on my experience in these matters, is probably the more likely of the two.
This is why buyouts of tech, service and other firms whose primary value is based on intangibles are more risky and undesirable than buyouts of boring manufacturing firms. The due diligence is just harder. How can one possibly know if the product is real? With manufacturing you can touch it, see the machines, watch them work, hear the click of the 900,000th washer falling into a bin of 899,999 other finished washers. A slick technical product that was "in the final touches of development" can evaporate right in front of you like so much Windex on clear glass, taking with it any hint of the grease of your already accounted for profits and leaving you staring right through to the now clearly visible abyss beyond. Unfortunately, however, debt payments are not soluble in Windex.
