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Comment by SirSourdough | Hacker News Reader

Tesla’s P/E is a function of stockholders inflating the stock price. The allegation here (by my limited understanding) is that Autonomy lied about how much revenue the business was actually generating. It’s not illegal to have your stock price inflated because of demand for the stock, but it is illegal to lie in your financial statements.

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OK but how is that possible? Before you sell a company there is a long due diligence process, where all papers and everything else is given to inspection, and I can imagine team of 10 people lawyers accountants and experts going to every, note, paper and even paperclip.

Also isn't rule of market capitalism, if I am the seller I can put any price in the product/service I own, if you do not like my price you do not have to buy?!

Even if the paperwork is going to be double checked, it is still fraud to lie on it.

The short answer is that HP didn’t identify the fraud when they did their due diligence. Just because you look at a businesses financials doesn’t mean you’ll identify fraud they are trying to hide.

As far as the seller determining the price, that’s true but the price they set is set on the basis that they aren’t lying about what they are selling you.

If someone sells you a pure gold box that turns out to just be aluminum wrapped in gold foil, that’s fraud even if you agreed to pay for the pure gold box. The seller did not provide the thing you agreed to pay for. It’s the same in this case, the seller allegedly lied about what they were selling to get HP to agree to an inflated price.

That scenario looks fishy to me, even when you buying second hand car you do bit of exploration and for buying something with price tag of £11,000,000,000 well you dig a bit deeper, and due diligence is not just going to your financial statements and what is usually accessibly in UK publicly. During that process you dig trough everything, bank statements, expenses, salaries, earnings, revenue streams ... everything.

Personally, I think it is impossible HP has not seen something like that, or they have sent complete idiots to do due diligence.

I don't think you understand the complexity of this type of finance or the sophistication that's possible while committing fraud. These things are not necessarily simple to detect.

Maybe I don't as it must be some very sophisticated fraud when checking all in the following list they missed something like that.

" Corporate attorneys generally review all the company’s financial information from the last five years, including income statements, balance sheets, cash flow and audit reports. Other financial documents that may be reviewed include projections, budgets and forecasts for the financials of the next five years and assess whether they are reasonable. Finally, corporate attorneys generally review all credit agreements, debts and contingent liabilities. "

https://www.priorilegal.com/deals/mergers-acquisitions/manda...

Yes, and the entire point of this type of fraud is to deceive this exact process. The fraudster knows what due diligence is going to be performed.

Presumably the folks regularly involved in the closing of 11 figure deals are capable of sniffing out deception. Though maybe the HP board cheaped out and hired the B team instead?

Seems like US companies only ever use the B team these days.

Even if they sent idiots to do the DD, if they find out later that there was fraud... it's still fraud. You can't just yell "No taksey backsies!".

Given the list of sophisticated financial fraud mechanisms charged, even if it WAS mismanaged, it was still fraud.

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