Morpheus Research accuses Backblaze of precarious financial standing masked by manipulative accounting practices. They allege Backblaze inflates its cost of revenue by inappropriately capitalizing expenses related to hard drives, thereby creating a misleadingly positive gross margin. This supposed misrepresentation extends to Backblaze B2's profitability, which Morpheus Research claims is non-existent. Further accusations include insider selling amidst these financial troubles and a questionable lawsuit settlement, painting a picture of a company struggling to stay afloat and misleading investors.
The Morpheus Research post, "Backblaze: Mounting Losses, Lawsuits, Sham Accounting, Insider Selling," paints a deeply critical picture of Backblaze, a cloud storage and data backup company. The author argues that despite presenting itself as a thriving business, Backblaze is actually teetering on the brink of financial collapse, propped up by dubious accounting practices and misleading narratives.
The central argument revolves around the assertion that Backblaze's reported profitability is a mirage, constructed through manipulative accounting maneuvers. The post meticulously dissects the company's financial statements, alleging that Backblaze employs aggressive revenue recognition tactics, prematurely booking revenue before services are fully rendered. Furthermore, the author contends that Backblaze capitalizes expenses that should rightfully be expensed, artificially inflating profitability and obscuring the true extent of its losses. The analysis also questions the company's claims of robust customer growth, suggesting that the reported figures are inflated and don't reflect genuine market penetration.
Adding to this bleak financial picture, the post highlights ongoing lawsuits against Backblaze, portraying them as further evidence of the company's precarious position. These legal battles, according to the author, expose vulnerabilities in Backblaze's business model and pose significant financial risks that could exacerbate its already strained finances. The specific nature of these lawsuits and their potential impact on Backblaze's future are detailed in the analysis.
The author further accuses Backblaze of insider selling, implying that those with intimate knowledge of the company's true financial health are divesting their holdings, signaling a lack of confidence in its future prospects. This alleged insider selling is presented as another red flag, reinforcing the narrative of a company in dire straits attempting to conceal its true condition from investors.
In conclusion, the Morpheus Research post portrays Backblaze not as a burgeoning tech company, but rather as a financially unstable entity resorting to deceptive accounting, struggling with legal challenges, and witnessing insider flight. The author's overarching argument is that Backblaze is a risky investment, and the seemingly positive public image is a carefully constructed facade designed to obscure a deeply troubled reality. The post urges caution and encourages potential investors to thoroughly scrutinize the company's financial statements and consider the alleged issues before making any investment decisions.
Summary of Comments ( 97 )
https://news.ycombinator.com/item?id=43802675
Hacker News users discuss Backblaze's financial situation, with several expressing skepticism about the company's long-term viability. Some commenters highlight the mounting losses, questioning Backblaze's ability to compete with larger cloud storage providers. Others focus on the allegations of "sham accounting" and insider selling, raising concerns about the company's transparency and management. A few users defend Backblaze, pointing to their unique B2 offering and competitive pricing, suggesting the company might still have a niche to exploit. However, the overall sentiment appears to be one of caution and concern about Backblaze's future. Several users also discuss the challenges of running a profitable storage business, citing thin margins and fierce competition. Some debate the merits of the short-seller report and the potential for bias.
The Hacker News post titled "Backblaze: Mounting Losses, Lawsuits, Sham Accounting, Insider Selling" linking to a Morpheus Research report critical of Backblaze generated a moderate discussion with a variety of viewpoints. Several commenters expressed skepticism about the Morpheus Research report itself, questioning the firm's credibility and potential motives. Some pointed to the fact that the report was not free and suggested it might be a short-selling tactic. One commenter stated plainly, "This is a hit piece by a short seller, not actual analysis," while another questioned the firm's track record and suggested looking into it before taking the report's claims at face value. This sentiment was echoed by several others who emphasized the importance of considering the source when evaluating such critical analyses.
Others focused on the specific criticisms leveled against Backblaze in the report. Some commenters discussed the challenges Backblaze faces in the cloud storage market, particularly competing with giants like Amazon, Google, and Microsoft. They acknowledged the difficulties of maintaining profitability in this competitive landscape. There was discussion regarding the lawsuit mentioned, with some seeking further information and others downplaying its significance.
A few commenters defended Backblaze, highlighting the company's transparency and relatively low storage costs. They suggested that Backblaze offers a valuable service and that the criticisms might be overblown. One commenter specifically noted their positive experience with Backblaze's services, suggesting it offered good value and worked well for their needs.
Overall, the discussion involved a healthy dose of skepticism towards the critical report, calls for more information and due diligence, acknowledgment of the challenges Backblaze faces, and some defense of the company's offerings and practices. The thread did not represent a consensus view but rather a range of perspectives on the report and Backblaze's situation.