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Just pointing out how you can siphon off massive amounts of money from passive investors because they invest in a certain fixed way. Smart entrepreneur (he's sm
by charlesdm 9y ago
Just pointing out how you can siphon off massive amounts of money from passive investors because they invest in a certain fixed way. Smart entrepreneur (he's smart after all) would also likely raise his capital from a wealthy family office, thus take very few risks himself.
Private equity roll-ups are another example -- you buy one amazing asset at 15x earnings, roll up a few other ok or "meh" businesses that you can buy at 5 to 10x earnings, and go public with a group that then trades at 20x earnings. Preferably while loading it up with a ton of debt before going public. Who buys that? Why your pension fund, of course.
- MR4D 9y agoThe p/e is basically irrelevant. You want to buy a company that is somehow broken (hence why p/e is irrelevant - if the company was barely losing money, the p/e would be infinite). Buying a broken company allows you to fix the flaw(s), and then sell the fixed company back to the market. Even if the p/e were the same, if done correctly, you make a killing on the deal.