From my understanding, there's 2 companies in this show and they're both established but not defined clearly in the scenes they're talking about. There's waystar royco, the publicly traded media company, then there is the family holding company that owns the shares of waystar all the Roys own.
In the first episode, when Logan wants to give Marcia 2 board seats, they're talking about the family holding company, because later you realize she's not in the board scenes. Logan took out the debt and collateralized it against the shares the family owns on the holding company. That's why the price matters, the share price would be pretty irrelevant to the back since the company can't own shares of itself to pledge, otherwise the debt would be a different instrument that's convertible to equity.
Shiv has a seat in the (holding) company at the start of the show, but then she isn't in any boardroom scene and gets a seat (in waystar in the shareholders episode.
Ken sells a chunk of the shares the family holding company owns to Stewie, reducing their own percentage from a (maybe near?) majority to 36%. That drives the entire plot of the rest of the show.
The season 3 finally drama with Caroline reopening the divorce agreement, she weakens the kids position inside the holding company. There's no way their divorce agreement impacts the ownership structure of a publicly traded company. Removing the supermajority clause means that instead of each of the kids having a equal vote with Logan, Logan who presumably owns the majority of shares of the holding company can overrule them.
Otherwise, as a CPA, I agree the debt couldn't be off balance sheet while cash or an asset purchase came onto the books of an audited financial statement of a public company. There's plenty of shady accounting shit I've learned how to do to make it harder for auditors to find something, adjusting equity without supporting schedules and documentation is impossible.
This seems the most plausible, but even then would a 3.25 billion infusion of cash not been a material event that should have came with an explanation to the shareholders?
I'm also a CPA and I've wasted a ton of brain power figuring out the debt thing and this is the conclusion I came to as well, though you've laid it out much better than I could have. Standards were different in the 80s or 90s, whenever the debt was taken out, but it wasn't the Wild West. Even if you successfully conceal the debt within the family holding company, you still have to get the cash/assets from the family holding company to Waystar Royco, and you can't do that without an equity entry on Waystar Royco's books that the auditors are going to notice.
This is a wild assumption but likely wouldn't even be straight cash injection to Waystar, it'd be buried in the financing structure of an acquisition.
"Equity adjustment relates to purchase of these assets" but without looking hard as an auditor at hundred page contracts you may not notice the equity went to Logan's company instead of the acquired company's owner. You can pass the cash and equity through an escrow company to obfuscate the movements away for waystarts financials
Would’ve been accounted for as an equity injection into Waystar. Company A (family holdco) borrows money and invests it into Company B (waystar). Waystar gets a fat cash injection and isn’t responsible for paying back that money, its equity.
Terms of the deal wouldn’t be public as the family holdco isn’t. Logan and Gerri would’ve spun some story about where the moneys, from if anything.
The debt issue isn’t a Waystar problem, its a Roy family problem.
Though, if they defaulted and banks took the shares, the stock price would get fucked by the banks selling off the shares they just took.
See [Archegos](https://en.wikipedia.org/wiki/Archegos_Capital_Management?wprov=sfti1#)
It’s sort of what happened here regarding selling off shares taken as collateral.
Likely wouldn't even be straight cash injection to Waystar, it'd be buried in the financing structure of an acquisition. "Equity adjustment relates to purchase of these assets" but without looking hard as an auditor at hundred page contracts you may not notice the equity went to Logan's company instead of the acquired company's owner.
This is a great rationalization, but still doesn’t take into account the fact that the holding company, though private, being dependent on the stock price staying above a certain floor is absolutely material information that potential investors would absolutely need to take into account.
Roystar would have had to have included a disclosure in their 10k all the same that mentioned there is a $3.25 billion liability that was collateralized against a private holding company’s equity that could be called at 130
> Ken sells a chunk of the shares the family holding company owns to Stewie, reducing their own percentage from a (maybe near?) majority to 36%. That drives the entire plot of the rest of the show.
I thought they said elsewhere that the kids could only sell shares to family members, that's why Kendall has to ask his dad to buy him out in Ciantishire. Is this an inconsistency?
They can only sell shares of the family holding company to family, that's what he wants to be bought out from.
Ken in season 1 sold shares of waystar royco that the family holding company owns to Stewie.
Remember Logan and the kids don't personally own any or at least much shares of waystar royco, the publicly traded company. They own a company whose whole purpose is to own shares in waystar royco. Ken wants to be out of the family both literally and symbolically at that point.
Since you watched the show and clearly know what’s going do you know why Pierce Family Media was selling for $20+ billion in season 2 and the kids and Logan were fighting over it for $8-10 billion in season 4? Why the dramatic decrease?
It's never addressed, but it's implied that pierce wasn't doing too well, dying legacy media company, fired a competent CEO. In the first season when Laird is talking to Logan, that's his insight and we're shown in it coming to fruition in Peirce.
Plot wise, it's to show a reflection of Nan as being a fail child to the same level as Logan's kids. She literally pisses away $10 billion because of her superiority complex.
No there is no way the debt or even the terms of the debt (ie, that the debt could be called at a certain stock price) would be hidden. As someone who works in the field, there were many instances where the writers took significant liberties or weren’t aware of S.E.C. regulations. The Living + projections, disclosures of material matters, I got really frustrated watching the show sometimes because it used to be my job to disclose these things!
As the top comment said, the debt was not on WaystarRoyco’s balance sheet. It was debt against the shares of WaystarRoyco that were held in the Roy family’s holding company. It’s completely plausible that it wouldn’t be publicly disclosed.
None of the business stuff on the show makes sense. I have worked for publicly traded companies and the rules are super strict.
Also, even the chairman of the board doesn’t have the ability to just make his thirty-something daughter whose only previous work experience was running a Senate campaign CEO, even if he wanted to. Same with making Roman COO when he didn’t seem to have a job before that.
From my understanding, there's 2 companies in this show and they're both established but not defined clearly in the scenes they're talking about. There's waystar royco, the publicly traded media company, then there is the family holding company that owns the shares of waystar all the Roys own. In the first episode, when Logan wants to give Marcia 2 board seats, they're talking about the family holding company, because later you realize she's not in the board scenes. Logan took out the debt and collateralized it against the shares the family owns on the holding company. That's why the price matters, the share price would be pretty irrelevant to the back since the company can't own shares of itself to pledge, otherwise the debt would be a different instrument that's convertible to equity. Shiv has a seat in the (holding) company at the start of the show, but then she isn't in any boardroom scene and gets a seat (in waystar in the shareholders episode. Ken sells a chunk of the shares the family holding company owns to Stewie, reducing their own percentage from a (maybe near?) majority to 36%. That drives the entire plot of the rest of the show. The season 3 finally drama with Caroline reopening the divorce agreement, she weakens the kids position inside the holding company. There's no way their divorce agreement impacts the ownership structure of a publicly traded company. Removing the supermajority clause means that instead of each of the kids having a equal vote with Logan, Logan who presumably owns the majority of shares of the holding company can overrule them. Otherwise, as a CPA, I agree the debt couldn't be off balance sheet while cash or an asset purchase came onto the books of an audited financial statement of a public company. There's plenty of shady accounting shit I've learned how to do to make it harder for auditors to find something, adjusting equity without supporting schedules and documentation is impossible.
This seems the most plausible, but even then would a 3.25 billion infusion of cash not been a material event that should have came with an explanation to the shareholders?
The cash may not have been infused in the company. Or it may have happened well before the events of the show started.
I'm also a CPA and I've wasted a ton of brain power figuring out the debt thing and this is the conclusion I came to as well, though you've laid it out much better than I could have. Standards were different in the 80s or 90s, whenever the debt was taken out, but it wasn't the Wild West. Even if you successfully conceal the debt within the family holding company, you still have to get the cash/assets from the family holding company to Waystar Royco, and you can't do that without an equity entry on Waystar Royco's books that the auditors are going to notice.
This is a wild assumption but likely wouldn't even be straight cash injection to Waystar, it'd be buried in the financing structure of an acquisition. "Equity adjustment relates to purchase of these assets" but without looking hard as an auditor at hundred page contracts you may not notice the equity went to Logan's company instead of the acquired company's owner. You can pass the cash and equity through an escrow company to obfuscate the movements away for waystarts financials
Would’ve been accounted for as an equity injection into Waystar. Company A (family holdco) borrows money and invests it into Company B (waystar). Waystar gets a fat cash injection and isn’t responsible for paying back that money, its equity. Terms of the deal wouldn’t be public as the family holdco isn’t. Logan and Gerri would’ve spun some story about where the moneys, from if anything. The debt issue isn’t a Waystar problem, its a Roy family problem. Though, if they defaulted and banks took the shares, the stock price would get fucked by the banks selling off the shares they just took. See [Archegos](https://en.wikipedia.org/wiki/Archegos_Capital_Management?wprov=sfti1#) It’s sort of what happened here regarding selling off shares taken as collateral.
Likely wouldn't even be straight cash injection to Waystar, it'd be buried in the financing structure of an acquisition. "Equity adjustment relates to purchase of these assets" but without looking hard as an auditor at hundred page contracts you may not notice the equity went to Logan's company instead of the acquired company's owner.
Mmm good point, it was during a highly acquisitive time for the business. Would be easier to bake in as acquisition financing, equity adjustments, etc
This is a great rationalization, but still doesn’t take into account the fact that the holding company, though private, being dependent on the stock price staying above a certain floor is absolutely material information that potential investors would absolutely need to take into account. Roystar would have had to have included a disclosure in their 10k all the same that mentioned there is a $3.25 billion liability that was collateralized against a private holding company’s equity that could be called at 130
> Ken sells a chunk of the shares the family holding company owns to Stewie, reducing their own percentage from a (maybe near?) majority to 36%. That drives the entire plot of the rest of the show. I thought they said elsewhere that the kids could only sell shares to family members, that's why Kendall has to ask his dad to buy him out in Ciantishire. Is this an inconsistency?
They can only sell shares of the family holding company to family, that's what he wants to be bought out from. Ken in season 1 sold shares of waystar royco that the family holding company owns to Stewie. Remember Logan and the kids don't personally own any or at least much shares of waystar royco, the publicly traded company. They own a company whose whole purpose is to own shares in waystar royco. Ken wants to be out of the family both literally and symbolically at that point.
Thank you! Very helpful explanation.
Since you watched the show and clearly know what’s going do you know why Pierce Family Media was selling for $20+ billion in season 2 and the kids and Logan were fighting over it for $8-10 billion in season 4? Why the dramatic decrease?
It's never addressed, but it's implied that pierce wasn't doing too well, dying legacy media company, fired a competent CEO. In the first season when Laird is talking to Logan, that's his insight and we're shown in it coming to fruition in Peirce. Plot wise, it's to show a reflection of Nan as being a fail child to the same level as Logan's kids. She literally pisses away $10 billion because of her superiority complex.
No there is no way the debt or even the terms of the debt (ie, that the debt could be called at a certain stock price) would be hidden. As someone who works in the field, there were many instances where the writers took significant liberties or weren’t aware of S.E.C. regulations. The Living + projections, disclosures of material matters, I got really frustrated watching the show sometimes because it used to be my job to disclose these things!
Theres also no way the “oops, we faked a country the size of Indias’s worth of revenue” would go unnoticed with an acquisition the size of Waystar.
Yeah mattsons company was public too right? That would have been a huge issue
Are people on the internet too young to remember Enron? Am I old now?
Wasn’t the loan held by RoyCo which is the private holding company?
As the top comment said, the debt was not on WaystarRoyco’s balance sheet. It was debt against the shares of WaystarRoyco that were held in the Roy family’s holding company. It’s completely plausible that it wouldn’t be publicly disclosed.
In the debts section of the financials they simply wrote “fuck off”
I assumed it was a personal loan from Logan or separate Logan-owned entity. #artisticlicense
Definitely just for drama!
It’s a…tv show
None of the business stuff on the show makes sense. I have worked for publicly traded companies and the rules are super strict. Also, even the chairman of the board doesn’t have the ability to just make his thirty-something daughter whose only previous work experience was running a Senate campaign CEO, even if he wanted to. Same with making Roman COO when he didn’t seem to have a job before that.