54 ms·

America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

298 points by Deinos 7y ago

vorpalhex 7y ago
This is not an uncommon story for firearm manufacturers unfortunately. Tooling costs are high, sales hard to predict, and designs can fail easily. Ian McCollum of Forgotten Weapons has done a lot of videos on this topic.
- Simulacra 7y ago
  There's also the issue - perhaps - of market saturation. How many guns does one need? My pro-gun friends typically seem to have 2-3 but shy away from any more than that.
  - krapp 7y ago
    Clearly we need to elect another Democratic president to spur the market on.
    - dsfyu404ed 7y ago
      But preferably after two particular members of a certain branch of government croak and a republican president gets to replace them. I like my snake unstepped. People who live in certain states that shall not be named deserve their snake unstepped too.
      - captainredbeard 7y ago
        Repealing the NFA & the Hughes amendment to FOPA would be great.
  - i80and 7y ago
    Adding onto this, guns also last more or less indefinitely under normal usage and a proper care regimen (which, granted, not everybody follows).
  - dsfyu404ed 7y ago
    >How many guns does one need? Need or want? Like any other hobby your limit is your budget. There are guns that exist for no other reason than the lulz ("hundred dolla problem solva" I'm looking at you). Historically inclined individuals could spend a fortune just collecting variants of one specific niche of firearms from a particular nation and time period.
    - turk73 7y ago
      The Boomer aged guys seem to have a hoarding problem--I've seen photos of collections of 200 M1 Garands, 25-50 M1 Carbines, etc. Nobody cares that the cartouche on a stock is a little bit different. There's unhealthy obsession there. Not that I care. It's none of my business how someone spends their money.
    - deleted 7y ago
      [deleted]
  - josefresco 7y ago
    > My pro-gun friends typically seem to have 2-3 From my experience, that's sort of low. I never thought my neighbors had so many guns, until I started spending time at the shooting range. A common site is a trunk packed to the gills with firearms. The "gun guys" buy them like the "sneaker guys" buy Nikes. They usually won't talk about it, unless you express interest or go shooting with them.
    - omegaham 7y ago
      Can confirm, my father-in-law has more than 50. It's actually a really neat collection, but I wince at how much it had to cost and how much use he actually gets out of them.
      - wl 7y ago
        Some people collect coins. Or cars. Others collect guns. You don't have to shoot a gun to appreciate it. My great grandfather's service revolver? It's a link to the past, not a range toy.
    - dogismycopilot 7y ago
      The average American gun owner has between 5 and 6 firearms. I just took the class.
  - sparrish 7y ago
    As a firearm enthusiast, the answer to "How many guys does one need?" is always "Just one more." <grin> It's a fun hobby that I can spend time with my kids. They also make great investments as a quality firearm holds it worth and often increases in value.
    - mindcrime 7y ago
      Yeah, take any hobby or sport or whatever that involves "gear" of some sort, and you'll get some variation of the old saw: "The correct number of $ITEM to own is n+1, where n is the number you own now." $ITEM can be "mountain bikes", "guitars", "road bikes", "motorcycles", "guns" or pretty much anything.
      - paulddraper 7y ago
        Yeah, I think it's fair to say that stamp collectors have tend to have more than "necessary" number of postage stamps.
    - jfk13 7y ago
      And of course, the more of them we have around, the better the chances that one of them will somehow accidentally get misused one day. Oh, sorry; I'm sure you're entirely careful and responsible, all the time, just like every other firearms buyer. So there's clearly no problem with having an ever-increasing number of them around.
      - sDlEzAtyoNAz 7y ago
        And the better chances that one will be used intentionally to protect a productive and decent member of society from a violent criminal.
        fjsolwmv 7y ago
        That's certainly the fantasy.
  - Blackthorn 7y ago
    All the pro gun people I know, self included, have more than that. There are more guns than people in America, but not nearly everyone is a gun owner.
    - ummwhat 7y ago
      iirc the number of guns in America is almost exactly equal to the population but the distribution is skewed a lot. About 2/3rds of Americans don't own a gun. The ones who do on average own 3, with a lot of them having 1 and a few of them having dozens.
      - dfrage 7y ago
        You're recalling a very old guess; an analysis since then https://web.archive.org/web/20190121202815/http://weaponsman.com/?p=33875 https://web.archive.org/web/20190121202815/http://weaponsman... puts the number anywhere from 412 to 660 million. The old estimates are bad, for example, 275 million new in to the market guns were counted by a system the BATFE introduced in 1999 for high volume manufacturers, importers and wholesalers, a total of 66 FFLs, that no academic had previously used in an estimate.
  - howard941 7y ago
    This sounds reasonable but the article indicates sales were good and gross profits high but what killed the company was aptly-named Cerberus' extraction of assets. It's a story we've seen before at Toys 'R Us, Sears, and others. A modern day Heracles is needed to deal with this beast.
  - jcranmer 7y ago
    There is an intriguing trend in the United States where, for the past several decades, the number of gun owners has gone down but the number of guns has gone up.
    - brightball 7y ago
      Do you mean the percentage of owners? I can count on one hand the number of people I know who own a home but don't own a firearm.
      - et2o 7y ago
        What state do you live?
        brightball 7y ago
        South Carolina.
      - jcranmer 7y ago
        I did mean the percentage, but it does look like the absolute number of households owning guns has very slightly declined.
        Junk_Collector 7y ago
        I imagine it's difficult to get good numbers on ownership though as the cross section of people who would not disclose firearm ownership to the government or polling agency would also be likely to own a firearm. This is compounded by the fact that firearms last upwards of 100 years with minimal maintenance and there are healthy secondary and black markets for them.
        hcurtiss 7y ago
        Nope. No guns at this here house. Not since the tragic boating accident of early 2019.
  - claydavisss 7y ago
    That isn't the case here. The products were of low quality. Firearms sales ebb and flow but there is no sign of a fundamental trough.
  - ergothus 7y ago
    Compare to social media games like Farmville - most people might spend money they personally consider excessive, but that balances out with some other forms of entertainment. Meanwhile I've heard they had people spending upwards of $10k PER MONTH. Enough so that it wasn't "that one weirdo". So while the "average" owner might have 1-3 guns (in this case), and the average "fanatic" might have 5-10, you have enough obsessives to throw things off. (Carefully does not look at bookshelf with literal hundreds of RPGs)
    - baud147258 7y ago
      Carefully does not look at Steam/GOG libraries with hundreds of games
      - cr0sh 7y ago
        Carefully does not peek inside home shop to see tons of crap (aka - "vintage computers and robotics") purchased from hamfests... /sigh
    - r00fus 7y ago
      Ah, the "whale" model. Of course, what's to seperate a whale from an investor looking to goose the numbers to get his % higher?
  - madengr 7y ago
    Hell, I’m an order of magnitude higher, and am on the low end.
  - TallGuyShort 7y ago
    Let's see, 3 for 3-gun matches, 1 more for PCC matches, 1 more for precision matches, a few extra if I don't compete in the same class for all of those, 1 the kids can shoot, 1 for my wife to carry, 1 for me to carry, bigger ones for the house and cabin, a few extras for the zombie apocalypse. No, there's plenty of demand for guns. Remington's just lost their former reputation.
    - dba7dba 7y ago
      Lol, you forgot to mention buying ones for family and friends, like Matt Carriker of offtheranch channel. I agree free market (with certain safeguards) is usually the best path for a society to sustain itself and prosper. But I feel private equity firms are definitely not good for a free market to sustain itself. And yet they and their lobbyists will insist free market is the best for our society, use that line to prevent any regulations over what they do.
      - TallGuyShort 7y ago
        I don't see the market not sustaining itself, though. As a consumer, if I'm not satisfied with Remington, I just buy a Mossberg instead of an 870, or a Bergara instead of a 700, or literally anything but an XD. There's a lesson to be learned that if you open your investment to the public or get in bed with a private equity firm, you may now be pressured or forced into short-term thinking that isn't aligned with your long-term vision. But I don't see this as a failure of the market. In a free market, losers lose.
        omegaham 7y ago
        Yep. The gun market is saturated right now. Literally everything that Remington makes is also made by half a dozen (or more) competing companies. If they make stupid decisions and build garbage, that's tough for them. We don't have any pity for auto manufacturers who make garbage and lose badly. Why would anyone have pity for gun manufacturers who do the same?
    - icelancer 7y ago
  - mikestew 7y ago
    As will be clear in a moment, I'm hardly anti-gun but certainly not "pro-gun", and I count five in the gun safe. Shotgun, rifle, and a couple of handguns adds up quickly. Why so many for a "not pro-gun" guy? Shotgun/rifle/handgun fill different categories, and we have several handguns because I like Glocks, the Colt 1991 custom is purdy, and she likes her .357 short barrel.
  - stcredzero 7y ago
    I'm a relatively new gun owner. I have 2 firearms, and by design I won't have any more for a very long time. I would have just the rifle, but it's often awkward or impossible to take classes and compete without a pistol. My entire system runs on the same caliber, and all of the magazines are interchangeable. It used to be that almost every American household had someone who was a competent shooter, an good cook, a competent musician, a decent craftsperson or repair person of some kind. Times have changed. From what I have seen, only having 1 gun is more common in the African American community and in some parts of rural America.
    - pps43 7y ago
      In poor neighborhoods communal guns are quite popular. They are stashed at locations that several people know about and have access to.
  - ryanmarsh 7y ago
    Ask more pro-gun friends. It kind of becomes an addiction. Everyone I know has a 30 gun safe that's damn near full.
    - kyrieeschaton 7y ago
      Yeah, but a full 30 gun safe only has about 10 guns in it.
  - Spooky23 7y ago
    The problem with the "gun" issue is that people who aren't in the culture get exposed to movies, crime reporting and crazy people and just don't have a perspective on many/most of the people who are into guns. I grew up in NYC and moved to a country town when I was 10-11 years old. Guns were forbidden things that only cops and soldiers should have from our family's POV -- it was really awkward. But the sporting, enthusiast and security drivers of demand for firearms is real and legitimate, and folks in that culture are equally confused about the point of view. My parent's neighbor had a bunch of guns -- probably like 20. Some were antique, he had shotguns for deer, trap/skeet, birds, rifles for hunting and target shooting and cheap ammo guns for plinking and practice. Shooting sports were family activities that were positive things. I was into baseball, my neighbor was into shooting and archery. Unfortunately, the toxic politics around the issue encourage extreme positions and ultimate reduce real and nuanced issues into binary positions that encourage bad behavior. It doesn't help that extreme positions make money for different stakeholders.
  - rspeele 7y ago
    Did you ask how many they had and get the answer, "oh, a few"?
    - Simulacra 7y ago
      Oh no, I asked to see them.
  - pps43 7y ago
    > How many guns does one need? I saw several estimates that agree on average somewhere between 8 and 10. A couple of bolt action rifles for hunting, rimfire for plinking with kids, a pump-action shotgun stashed somewhere for home defense, a pistol to carry concealed, another pistol as backup, grandpa's revolver that is now a decoration, and three old rifles in various state of decay at the back of the safe that everyone forgot about - those are all very typical.
  - some_random 7y ago
    Need is just flat out the wrong word in the context of hobbies, it's like asking how many stamps or cars a collector needs. In the context of collecting, 2-3 guns is _crazy_ low.
- throwayEngineer 7y ago
  Not uncommon for most businesses. >You build something, people want it, pay money. >Competition happens and you need to change or die Don't change quick enough, you are dead. Big companies can't change quickly, but they can throw money at problems. Death of a company is inevitable.
  - blotter_paper 7y ago
    I mean, yes, but that's true of any system with competition. At 1441 years old, Kongō Gumi has outlasted a great many things. They will eventually die, though.
- C1sc0cat 7y ago
  Normally caused by producing bad products, some wacky massive change to the business model or losing a government contract.
- duxup 7y ago
  It feels like the sales are hard to predict have something to do with guns in the US being ... almost borderline fashion items in terms of how people decide things. Like there's a lot of discussion about usage and practicality among gun enthusiasts, but when they buy their 3rd or 6th gun ... I suspect the decisions are more about difficult to predict things and whims. It is a strange market.
  - paulddraper 7y ago
    I'd describe it as less "borderline fashion" (which any hobby has) more as legal caprice. Historical examples: * The Firearm Owners Protection Act banned machineguns manufactured before 1986. * The Federal Assault Weapons Ban banned certain semi-automatic weapons excluding those manufactured before 1994. Firearm hobbyists need decade-plus forward thinking predictions. What's today legal is a felony tomorrow, unless steps are taken now. This makes it a volatile guessing game, even more than other hazardous hobbies (cars, aircraft, martial arts, motorcycles, etc.).
    - duxup 7y ago
      I'm not sure I understand. You see popular revolvers selling well... nobody is buying those based on the law.
      - paulddraper 7y ago
        Historically, politically-related events do in fact play a large role in gun sales. There were lengthy and severe shortage of small arms and ammunition following both Obama's election and the Sandy Hook shooting, especially .22 caliber ammunition. [1] I don't think .22 ammunition is on the chopping block, but there's a general positive feedback loop, like a bank rush. [1] https://en.wikipedia.org/wiki/2008%E2%80%9313_United_States_ammunition_shortage https://en.wikipedia.org/wiki/2008%E2%80%9313_United_States_...
        dfrage 7y ago
        .22 ammunition uses rimfire priming, which requires unique machinery which as I recall no US company dared to buy more of, as mentioned in the Wikipedia article you linked to. Existing US 3 billion rounds per year + foreign imports couldn't keep up with the demand, which also seems to have included a lot of new gun owners, buying .22 models like their main guns or conversion kits for cheaper practice. Perhaps related to this scam, I don't remember any company other than Remington building out a major increase in capacity, that article mentions their $32 million plant expansion. Companies were reluctant since they didn't know when demand and supply would get back in sync, I would also wonder if smokeless powder capacity was a factor, there aren't very many companies that make it.
- ryanmarsh 7y ago
  This is not at all the case for Remington, who enjoys name brand status with long respected product lines. I got my first 870 pump shotgun at a Wal-Mart 30 years ago, as of last year Wal-Mart was still selling them. It was a great gun. I love it. The only reason people stopped buying them is quality went down as they were sucked dry by a PE firm.
- cascom 7y ago
  Not to mention as consumer products go they are incredibly long lived, I can’t think of many activities where someone might still use their grandfather’s [tennis racquet, golf clubs, etc], but you regularly see people still using 50-75 year old guns (if not older)
  - DuskStar 7y ago
    It doesn't help that a lot of the "fun shit" is restricted to those older guns, since they've been grandfathered in during the US's various prunings of gun rights. So a 50 year old gun might be legitimately superior to one manufactured this year, which causes all manner of weirdness.
    - wl 7y ago
      What kind of "fun shit" are you thinking of? Select fire is rare and expensive. Open bolt semiautomatics? Eh, some people are into collecting such things, but closed bolts are just as fun to shoot. Just about the only somewhat reasonably priced grandfathered "fun shit" are pistols that can take stocks and not be NFA SBRs.
      - DuskStar 7y ago
        Select fire is rare and expensive for legislative, not practical, reasons. And it is VERY fun, if not particularly useful. It's a large part of what I was thinking of. Why would the price matter?
        wl 7y ago
        If we're having a discussion about long-lived firearms having an effect on the market for new firearms, select fire is so rare (175,997 pre-86 transferrable as of February 2016[0]) as to be irrelevant. [0] https://www.nfatca.org/pubs/MG_Count_FOIA_2016.pdf https://www.nfatca.org/pubs/MG_Count_FOIA_2016.pdf
Blackthorn 7y ago
There's a certain amount of poetic justice here for Remington, seeing as how they acquired Marlin and then fired all their expertise, completely ruining the brand. Good riddance.
- sparrish 7y ago
  Agreed. This isn't a unique tale for a firearms manufacturer. This is a common tale for nearly any type of manufacturer that is bought out by private equity firms. They reduce costs and quality, load it with debt, suck it dry, and then dump it on their creditors.
  - bluejekyll 7y ago
    I’ve read about this scenario many times, but I’m curious about why any creditor would lend money to a company that’s poised to do this. Wouldn’t these private equity firms lose the ability to borrow money based on past practices like this?
    - Spooky23 7y ago
      Read the toys r us threads here on Hacker News from a year ago to understand. The cult of modern business thinking blinds folks in business from the obvious stupidity of the private equity business model. Self dealing almost never ends well.
    - refurb 7y ago
      Lenders lend money because it's not always a failure. Lenovo is a great example of a successful PE strategy.
      - kgwgk 7y ago
        HN (and the world in general, I guess) has a tendency to focus on the successful VC outcomes and the PE failures.
    - ptah 7y ago
kevin_b_er 7y ago
Not a mystery: Private equity firm bought them out with borrowed money, raided their resources to enrich themselves, then left Remington to rot. It is a common story now. The private equity firm makes a bunch of money and people are jobless.
- mobilio 7y ago
  Who said greed good?
- mkeeter 7y ago
  I like Jason Scott's take on it [1]: "I wonder how many times we're going to keep seeing news media post these sorts of news stories as a 'woah, a tornado hit this landmark' without including one single line about 'the landmark was put in the care of a tornado factory a few years back and never saw another repair'" https://twitter.com/textfiles/status/1096630478965260289 https://twitter.com/textfiles/status/1096630478965260289
  - deleted 7y ago
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    - deleted 7y ago
      [deleted]
- rtpg 7y ago
  I get that money is money, but I feel like we desperately need to make conflict of interests prosecutable, so we can kill the self-serving mess that are LBOs. In what universe is "I borrow a bunch of money, buy a company, then force the company to basically borrow money from me" a value-creating operation? Cuz it sure isn't this one.
  - radiator 7y ago
    Interesting ... "money is money". But what exactly is fiat currency? Some would say it is not really money.
axaxs 7y ago
> A plunge in NIC checks foreshadows a corresponding plunge in gun sales I'm curious about this statement. NIC checks are, as the name implies, instant. They happen upon transfer of ownership of a firearm from an FFL dealer. So I'm not sure how they 'foreshadow' sales, more likely they mirror sales. In fact, when you purchase a gun online, the sale occurs before the check...
- madengr 7y ago
  Also, with the number of CCH licenses, those don’t needs a NICS check.
  - lostapathy 7y ago
    That of course is state dependent - not all states carry permits get you out of the NICS check.
    - dfrage 7y ago
      And in the other direction, fewer states are requiring a permit, so no doubt some people are not bothering to renew their permits.
- jkubicek 7y ago
  I don't know for a fact, but I'm guessing it's because theres a lag in the supply chain. NIC checks may instantly reflect a drop in sales at individual stores, but it will be a bit before that drop works its way back up through the suppliers and distributors to Remington itself.
- aparks517 7y ago
  NIC happens at retail. I suppose it would take time for retail sales volume changes to ripple back through the supply chain, so maybe manufacturers view it as a leading indicator.
paganel 7y ago
> Because private-equity firms appear frequently as villains in the press, many people assume that they cater mostly to the superrich, earning high returns on investments for billionaire clients. They do. But by far the most important piece of their business — 48 percent, according to the data-analytics firm Preqin — is investing capital for American pension funds. This doesn't get mentioned often enough when talking about the "1-percenters" and the wealth gap in Western countries, i.e. that most of the capital behind all of the current economic and social system is directly or indirectly held by part of the general populace itself. The issue is of course that the other part of the populace (generally speaking people under 35 who cannot put money towards their retirement funds or who can only get temp jobs) are not part of this financial arrangement and, as it so happens, are also some of the worst affected by the current economic set-up (those temp jobs I was mentioning are not as great as the normal full-time jobs held by people whose pension funds are managed by the companies investing in Cerberus). Afaik almost no politician has focused on this social and economical contradiction, if I may call it this way, some of them are putting whole of the blame on the 1-percenters, some of them are choosing to ignore it all together, but almost no-one has actually looked at the real numbers. And the real numbers tell the story of a society divided in two, a part that will manage to enjoy its pension and the other part that has no clue how will pay for its old age.
- stvswn 7y ago
  I think your point ignores that there's a mandatory federal pension system w/ a minimum benefit that people who don't save in private pension plans or who may only have temp jobs do contribute to, and will draw from in old age. It's true that it's not fully funded, sure, but if it didn't exist it would be the obvious policy solution to the problem you're describing.
- godzillabrennus 7y ago
  I’ve been shocked to the extent politicians haven’t focused on the lost tax revenue from the gig economy. I’m certain it’s caused a drop in tax revenue from what would normally constitute middle class tax payers.
  - 7y ago
madengr 7y ago
Remington just doesn’t have that many interesting guns. There are a ton of firearms manufacturers in the last 20 years. I’m guessing the AR-15 market alone is billions in revenue.
- ARandomerDude 7y ago
  And their quality has plummeted the past few years. I had an AK that could out-shoot my Rem 700 no matter what I did to it, and my 870 would only reliably eject Remington brand shells. Sold both, will never buy Remington again. Really a shame. Both of those were excellent guns back in the day.
  - ryanmarsh 7y ago
    That's sad. The 870 used to be the AK of shotguns. I beat that that gun like it owed me money and it kept cycling and shooting fine. The 700 used to be weapon of choice for many snipers. Hard to imagine today.
    - lostapathy 7y ago
      Not all (current) 870's are even created equally. The cheap one at a cabela's and a police model from a gun store are totally different leagues.
    - SlowRobotAhead 7y ago
      Almost all snipers in the US military today are still using a some Remington 700. The Mk13 which is expected to replace the Marine's scout snipers M40 is 700-pattern, just not built by Remington. You're going to be right soon, just not yet. Likewise, "The Military" is still using Rem 870 and Mossberg 500 shotguns. The "other military" that is, the IRS, Deptartments of Interior, Energy, Education, and everything else; their SWAT teams all use the Rem 700 and 870.
      - walshemj 7y ago
        They haven't switched to Accuracy International sniper specific rifels - the classic British two guys in a shed company.
johan_larson 7y ago
How are these strip-shops able to resell the heavily debt-burdened companies they create? That's the part I don't get.
- stcredzero 7y ago
  A historic, household name helps.
- cascom 7y ago
  Buy 20 companies, execute private equity playbook. a few are zeroes, most make 1-5x over 3-5 years...
- airstrike 7y ago
  They sell it to another sponsor who thinks they can do more with it. But by and large most private equity shops are not in the business of asset stripping. Those deals just don't make the news and the average reader is oblivious to them
dba7dba 7y ago
At this point, I feel most employees of a business that's up for sale should just put their foot down and say no to selling the company to any private equity firm. The owner can say, hey I worked for this and I need to exit with a plan. Well, the employees can say we worked for this and we need to make sure we will have our jobs in 5 - 10 years. I am working in a company that used to be privately owned, and was sold to a PE. It happened before I joined. The ones who are still here tell me the night and day difference in how the employees are treated before and after the sale. The treatment I'm talking about is how the employees are compensated.
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_bxg1 7y ago
"Financial engineers" aren't interested in building a sustainable business; they want to play a game cleverly, make a cash-grab, jump ship, and leave thousands dealing with the fallout. It's a similar short-term strategy to that taken by many SV founders who build a company only to sell it, though obviously the latter don't cause nearly the same degree of harm to society. But they still pass on opportunities to create actual value and jobs, in favor of making a quick buck and moving on to the next exploit. It's the mindset of locusts.
- iscrewyou 7y ago
  I love the term financial engineers. In my head, it defines the person, the procedure, and the purpose.
  - _bxg1 7y ago
    The problem with engineers (speaking as one myself) is that we're prone to focusing only on the mechanism itself, abstracting away the details and ignoring the parts of the system we can ignore. In software we can often get away with this because the rest of the system is just further machinery; there are benefits to taking it into consideration, sure, but nobody gets hurt when you don't. But business and finance are not software. Their systems are made of people. When you waste a CPU's time by ignoring its nuances, you simply get less out of it. When you shuffle money around, writing off the nuances of industry and economics as blips in a monetary machine, you destroy lives. I understand the appeal of the engineering mindset, but you have to be a psychopath to continue in it while leaving such destruction in your wake.
    - iscrewyou 7y ago
      I know and I agree. And a software engineer is much different than a mechanical engineer or a civil engineer. I guess I should’ve mentioned that the term financial engineer gives me context or a reference point where I can see that they are behaving like engineers. My comment was more focused on their behavioral mechanisms.
airstrike 7y ago
inb4 private equity is evil and we should kill all financiers Please don't throw the baby out with the bathwater
sn0n 7y ago
I especially liked this bit "The pension fund for the Boston-area public water utility invests in Cerberus. The California State Teachers’ Retirement System, CalSTRS, is a Cerberus client, as is a pension fund for the Presbyterian Church as well as many university endowments, sovereign wealth funds and philanthropic foundations." Made me chuckle a bit inside, as I know a couple people who are less on the side of guns, as they are more on the side of teaching, who would be dying inside knowing their retirement money is used like this.
- elamje 7y ago
  There are so many people that view investing like this. It's best to leave your morals and worldview to the side when investing, or letting others invest on your behalf.
- MrMorden 7y ago
  American universities have rushed to move as much lecturing as possible to adjuncts, and cap as many employees as possible at 29 hours/week to avoid the ACA. Just like with a fire-and-brimstone televangelist, it's only immoral if other people do it.
  - username223 7y ago
    > American universities have rushed to move as much lecturing as possible to adjuncts... it's only immoral if other people do it. No, it's just plain immoral, not to mention short-sighted. American primary and secondary schools are also squeezing their teachers, by hiring Filipinos on J-1 visas, just like tech companies do with H-1Bs. It's a bit like like making room in your fridge by pushing everything back, then adding new stuff. It works for awhile, but eventually leaves you with a mess of spoiled milk and rotten vegetables in the back. You can only strip-mine a hill for so long before it's gone.
- Rebelgecko 7y ago
  CalPERS rejected a push by the state treasurer to divest from gun companies that make guns or gun parts that are illegal in California. I don't think STRS has had the same push for divestment, but they're known for taking a more activist approach. IIRC CalSTRS actually has multiple employees whose entire job is to lobby gun companies to change their policies. Of course that sort of political and shareholder pressure is what led Smith and Wesson to start putting integral locks in the frame of their revolvers. That decision has had an almost universally negative response from their actual customers— those in-frame locks have a tendency to get rattled around by recoil and freeze the gun in an unsafe state.
legitster 7y ago
Yet another leveraged buy-out. Are there any business cases where one of these panned out well?
- closetohome 7y ago
  Depends who you ask.
- mrfredward 7y ago
  Leveraged buy-outs started off well enough. The original idea was something more like this: Old-timer spent years building a business, now it's worth about 2 million bucks and he wants to cash out. His young, motivated #2 in command wants to take over, and after years of saving has $200k. Old timer goes to the bank, takes out a $1.8 million dollar loan against all the business's assets, with the debt being the businesse's obligation. Older timer has the business pay him a one-time, $1.8 million dividend, and then sells the business to #2 for $200k. If business stays steady, the company's profits pay off the loan and everyone lives happily ever after. As a way for old-timers to retire and pass on control of small private companies, LBOs are really useful. The problems started in the 80s when private equity firms realized they could sell enough junk bonds to do LBOs on giant publicly-traded companies.
- cascom 7y ago
  well CalPERS net IRR investing in private equity is 10.7%... so yes Also to the two cerberus funds in which it has invested are have produced 14-17% IRRs https://www.calpers.ca.gov/page/investments/asset-classes/private-equity/pep-fund-performance https://www.calpers.ca.gov/page/investments/asset-classes/pr...
matthewaveryusa 7y ago
The part I don't get is how Cerberus made money. It seems like it was a zero-sum for Cerberus. They loaned the holding company 225M, and presumably got that money back through the holding buying the stock back from Cerberus after the holding sold the 11% corp. bonds. Is it that between when the holding bought the stock back from Cerberus and Cerberus (via the holding) sold the bonds Cerberus had control of Remington (via the holding stock) and therefore effectively sold Remington's assets, paying themselves through the holding's stock. Then, when Remington was valueless, the holding bought the stocks back from Cerberus as if Remington still had value leaving the bond holders hanging? That's such a dumb scam. Why would anyone buy those bonds, and how was Remington able to get a loan to buy the holding's stock if Cerberus raided it?
- CalChris 7y ago
  Cerberus buys Remington for $118M in cash and assumes $252M in Remington debt. Except that it wasn't Cerberus, it was a Cerberus subsidiary S which Cerberus owned with stock X. Then Remington borrowed $225M which it transferred to S which then bought back its stock X from Cerberus. Cerberus is then out of the transaction with $225M - $118M. Remington + S (which Cerberus no longer owns) has $252M + $225M in debt.
  - sigstoat 7y ago
    > Then Remington borrowed $225M which it transferred to S which then bought back its stock X from Cerberus. hmm. so, who is willing to loan Remington $225M in that situation? it seems like "recently bought by private equity company known for shenigans" would discourage banks and prospective bond purchasers?
    - CalChris 7y ago
      the holding company offered a generous interest rate of around 11 percent. When the interest payments were due, the holding company paid them not in cash but with paid-in-kind notes, that is, with more debt. Who could refuse such a deal?
lph 7y ago
These private equity scams seem to revolve around borrowing money, transferring the debt to a separate legal entity that then declares bankruptcy, and pocketing the money. If that’s true, then it would seem that creditors (and AL taxpayers in this case) end up holding the bag. How are savvy lenders falling for this?
boshomi 7y ago
the finitude of being Companies are man made so the have a limited live span. There is no exception, every man made organisation will end. While this is sad for every single case, the finitnes is a good thing at all. Thinking on finitnes of companies, stock market indexes have a mathematical limit.
- brainfeed0 7y ago
  They are living things. But also, greedy bastards can take living, thriving businesses into the embassy in Istanbul, chop them up and sell the pieces for profit.
nn3 7y ago
Sounds good to me. Essentially it ended up being an ethical investment. I hope Cerberus can use its "methods" on more gun makers.
mahgnous 7y ago
JFC tl;dr.
KorematsuFred 7y ago
This is sad to know. Back in India we owned a Remington rifle which was like 80 years old and still worked really well. No Indian made rifle could match its reliability.
bayareanative 7y ago
Vulture cannibal capitalists don't care who or what they destroy, as long as they make $.
- brainfeed0 7y ago
  Yup. Wonder if there's any co-op / worker-owned medium-sized firearms manufacturers that are US-based?
elchief 7y ago
The theory behind this is, a stable company should have plenty of debt, as it can easily pay it off (because it's stable), and is generally cheaper than equity. A company should also have only as much cash as it needs, else management will waste it So a private equity company sees a company like Remington, with too much cash and not enough debt. It borrows a lot, buys it, and minimizes cash reserves. This tends to increase the market cap substantially However, this obviously has some downsides, if you don't get the default risks just right...
kyrieeschaton 7y ago
Remington's product quality went way south soon after the acquisition and hasn't really recovered. When you have a very traditional market for your products (many firearms designs are decades old), those products are expensive, and potentially designed to save your life or at minimum contain tens of thousands of PSI inches from your face, losing your reputation for quality is a death sentence, and due to the capital costs, you're unlikely to be able to squeeze out cash by burning your reputation.
needaccount 7y ago
Anyone know a convenient summary showing Cerberus total cash flows and net earnings for the full time?
taksintikk 7y ago
Thoughts and prayers
deleted 7y ago
[deleted]

298 points by Deinos 7y ago

This is not an uncommon story for firearm manufacturers unfortunately. Tooling costs are high, sales hard to predict, and designs can fail easily. Ian McCollum of Forgotten Weapons has done a lot of videos on this topic.

Simulacra 7y ago
There's also the issue - perhaps - of market saturation. How many guns does one need? My pro-gun friends typically seem to have 2-3 but shy away from any more than that.
- krapp 7y ago
  Clearly we need to elect another Democratic president to spur the market on.
  - dsfyu404ed 7y ago
    But preferably after two particular members of a certain branch of government croak and a republican president gets to replace them. I like my snake unstepped. People who live in certain states that shall not be named deserve their snake unstepped too.
    - captainredbeard 7y ago
      Repealing the NFA & the Hughes amendment to FOPA would be great.
- i80and 7y ago
  Adding onto this, guns also last more or less indefinitely under normal usage and a proper care regimen (which, granted, not everybody follows).
- dsfyu404ed 7y ago
  >How many guns does one need? Need or want? Like any other hobby your limit is your budget. There are guns that exist for no other reason than the lulz ("hundred dolla problem solva" I'm looking at you). Historically inclined individuals could spend a fortune just collecting variants of one specific niche of firearms from a particular nation and time period.
  - turk73 7y ago
    The Boomer aged guys seem to have a hoarding problem--I've seen photos of collections of 200 M1 Garands, 25-50 M1 Carbines, etc. Nobody cares that the cartouche on a stock is a little bit different. There's unhealthy obsession there. Not that I care. It's none of my business how someone spends their money.
  - deleted 7y ago
    [deleted]
- josefresco 7y ago
  > My pro-gun friends typically seem to have 2-3 From my experience, that's sort of low. I never thought my neighbors had so many guns, until I started spending time at the shooting range. A common site is a trunk packed to the gills with firearms. The "gun guys" buy them like the "sneaker guys" buy Nikes. They usually won't talk about it, unless you express interest or go shooting with them.
  - omegaham 7y ago
    Can confirm, my father-in-law has more than 50. It's actually a really neat collection, but I wince at how much it had to cost and how much use he actually gets out of them.
    - wl 7y ago
      Some people collect coins. Or cars. Others collect guns. You don't have to shoot a gun to appreciate it. My great grandfather's service revolver? It's a link to the past, not a range toy.
  - dogismycopilot 7y ago
    The average American gun owner has between 5 and 6 firearms. I just took the class.
- sparrish 7y ago
  As a firearm enthusiast, the answer to "How many guys does one need?" is always "Just one more." <grin> It's a fun hobby that I can spend time with my kids. They also make great investments as a quality firearm holds it worth and often increases in value.
  - mindcrime 7y ago
    Yeah, take any hobby or sport or whatever that involves "gear" of some sort, and you'll get some variation of the old saw: "The correct number of $ITEM to own is n+1, where n is the number you own now." $ITEM can be "mountain bikes", "guitars", "road bikes", "motorcycles", "guns" or pretty much anything.
    - paulddraper 7y ago
      Yeah, I think it's fair to say that stamp collectors have tend to have more than "necessary" number of postage stamps.
  - jfk13 7y ago
    And of course, the more of them we have around, the better the chances that one of them will somehow accidentally get misused one day. Oh, sorry; I'm sure you're entirely careful and responsible, all the time, just like every other firearms buyer. So there's clearly no problem with having an ever-increasing number of them around.
    - sDlEzAtyoNAz 7y ago
      And the better chances that one will be used intentionally to protect a productive and decent member of society from a violent criminal.
      - fjsolwmv 7y ago
        That's certainly the fantasy.
- Blackthorn 7y ago
  All the pro gun people I know, self included, have more than that. There are more guns than people in America, but not nearly everyone is a gun owner.
  - ummwhat 7y ago
    iirc the number of guns in America is almost exactly equal to the population but the distribution is skewed a lot. About 2/3rds of Americans don't own a gun. The ones who do on average own 3, with a lot of them having 1 and a few of them having dozens.
    - dfrage 7y ago
      You're recalling a very old guess; an analysis since then https://web.archive.org/web/20190121202815/http://weaponsman.com/?p=33875 https://web.archive.org/web/20190121202815/http://weaponsman... puts the number anywhere from 412 to 660 million. The old estimates are bad, for example, 275 million new in to the market guns were counted by a system the BATFE introduced in 1999 for high volume manufacturers, importers and wholesalers, a total of 66 FFLs, that no academic had previously used in an estimate.
- howard941 7y ago
  This sounds reasonable but the article indicates sales were good and gross profits high but what killed the company was aptly-named Cerberus' extraction of assets. It's a story we've seen before at Toys 'R Us, Sears, and others. A modern day Heracles is needed to deal with this beast.
- jcranmer 7y ago
  There is an intriguing trend in the United States where, for the past several decades, the number of gun owners has gone down but the number of guns has gone up.
  - brightball 7y ago
    Do you mean the percentage of owners? I can count on one hand the number of people I know who own a home but don't own a firearm.
    - et2o 7y ago
      What state do you live?
      - brightball 7y ago
        South Carolina.
    - jcranmer 7y ago
      I did mean the percentage, but it does look like the absolute number of households owning guns has very slightly declined.
      - Junk_Collector 7y ago
        I imagine it's difficult to get good numbers on ownership though as the cross section of people who would not disclose firearm ownership to the government or polling agency would also be likely to own a firearm. This is compounded by the fact that firearms last upwards of 100 years with minimal maintenance and there are healthy secondary and black markets for them.
        hcurtiss 7y ago
        Nope. No guns at this here house. Not since the tragic boating accident of early 2019.
- claydavisss 7y ago
  That isn't the case here. The products were of low quality. Firearms sales ebb and flow but there is no sign of a fundamental trough.
- ergothus 7y ago
  Compare to social media games like Farmville - most people might spend money they personally consider excessive, but that balances out with some other forms of entertainment. Meanwhile I've heard they had people spending upwards of $10k PER MONTH. Enough so that it wasn't "that one weirdo". So while the "average" owner might have 1-3 guns (in this case), and the average "fanatic" might have 5-10, you have enough obsessives to throw things off. (Carefully does not look at bookshelf with literal hundreds of RPGs)
  - baud147258 7y ago
    Carefully does not look at Steam/GOG libraries with hundreds of games
    - cr0sh 7y ago
      Carefully does not peek inside home shop to see tons of crap (aka - "vintage computers and robotics") purchased from hamfests... /sigh
  - r00fus 7y ago
    Ah, the "whale" model. Of course, what's to seperate a whale from an investor looking to goose the numbers to get his % higher?
- madengr 7y ago
  Hell, I’m an order of magnitude higher, and am on the low end.
- TallGuyShort 7y ago
  Let's see, 3 for 3-gun matches, 1 more for PCC matches, 1 more for precision matches, a few extra if I don't compete in the same class for all of those, 1 the kids can shoot, 1 for my wife to carry, 1 for me to carry, bigger ones for the house and cabin, a few extras for the zombie apocalypse. No, there's plenty of demand for guns. Remington's just lost their former reputation.
  - dba7dba 7y ago
    Lol, you forgot to mention buying ones for family and friends, like Matt Carriker of offtheranch channel. I agree free market (with certain safeguards) is usually the best path for a society to sustain itself and prosper. But I feel private equity firms are definitely not good for a free market to sustain itself. And yet they and their lobbyists will insist free market is the best for our society, use that line to prevent any regulations over what they do.
    - TallGuyShort 7y ago
      I don't see the market not sustaining itself, though. As a consumer, if I'm not satisfied with Remington, I just buy a Mossberg instead of an 870, or a Bergara instead of a 700, or literally anything but an XD. There's a lesson to be learned that if you open your investment to the public or get in bed with a private equity firm, you may now be pressured or forced into short-term thinking that isn't aligned with your long-term vision. But I don't see this as a failure of the market. In a free market, losers lose.
      - omegaham 7y ago
        Yep. The gun market is saturated right now. Literally everything that Remington makes is also made by half a dozen (or more) competing companies. If they make stupid decisions and build garbage, that's tough for them. We don't have any pity for auto manufacturers who make garbage and lose badly. Why would anyone have pity for gun manufacturers who do the same?
  - icelancer 7y ago
- mikestew 7y ago
  As will be clear in a moment, I'm hardly anti-gun but certainly not "pro-gun", and I count five in the gun safe. Shotgun, rifle, and a couple of handguns adds up quickly. Why so many for a "not pro-gun" guy? Shotgun/rifle/handgun fill different categories, and we have several handguns because I like Glocks, the Colt 1991 custom is purdy, and she likes her .357 short barrel.
- stcredzero 7y ago
  I'm a relatively new gun owner. I have 2 firearms, and by design I won't have any more for a very long time. I would have just the rifle, but it's often awkward or impossible to take classes and compete without a pistol. My entire system runs on the same caliber, and all of the magazines are interchangeable. It used to be that almost every American household had someone who was a competent shooter, an good cook, a competent musician, a decent craftsperson or repair person of some kind. Times have changed. From what I have seen, only having 1 gun is more common in the African American community and in some parts of rural America.
  - pps43 7y ago
    In poor neighborhoods communal guns are quite popular. They are stashed at locations that several people know about and have access to.
- ryanmarsh 7y ago
  Ask more pro-gun friends. It kind of becomes an addiction. Everyone I know has a 30 gun safe that's damn near full.
  - kyrieeschaton 7y ago
    Yeah, but a full 30 gun safe only has about 10 guns in it.
- Spooky23 7y ago
  The problem with the "gun" issue is that people who aren't in the culture get exposed to movies, crime reporting and crazy people and just don't have a perspective on many/most of the people who are into guns. I grew up in NYC and moved to a country town when I was 10-11 years old. Guns were forbidden things that only cops and soldiers should have from our family's POV -- it was really awkward. But the sporting, enthusiast and security drivers of demand for firearms is real and legitimate, and folks in that culture are equally confused about the point of view. My parent's neighbor had a bunch of guns -- probably like 20. Some were antique, he had shotguns for deer, trap/skeet, birds, rifles for hunting and target shooting and cheap ammo guns for plinking and practice. Shooting sports were family activities that were positive things. I was into baseball, my neighbor was into shooting and archery. Unfortunately, the toxic politics around the issue encourage extreme positions and ultimate reduce real and nuanced issues into binary positions that encourage bad behavior. It doesn't help that extreme positions make money for different stakeholders.
- rspeele 7y ago
  Did you ask how many they had and get the answer, "oh, a few"?
  - Simulacra 7y ago
    Oh no, I asked to see them.
- pps43 7y ago
  > How many guns does one need? I saw several estimates that agree on average somewhere between 8 and 10. A couple of bolt action rifles for hunting, rimfire for plinking with kids, a pump-action shotgun stashed somewhere for home defense, a pistol to carry concealed, another pistol as backup, grandpa's revolver that is now a decoration, and three old rifles in various state of decay at the back of the safe that everyone forgot about - those are all very typical.
- some_random 7y ago
  Need is just flat out the wrong word in the context of hobbies, it's like asking how many stamps or cars a collector needs. In the context of collecting, 2-3 guns is _crazy_ low.
throwayEngineer 7y ago
Not uncommon for most businesses. >You build something, people want it, pay money. >Competition happens and you need to change or die Don't change quick enough, you are dead. Big companies can't change quickly, but they can throw money at problems. Death of a company is inevitable.
- blotter_paper 7y ago
  I mean, yes, but that's true of any system with competition. At 1441 years old, Kongō Gumi has outlasted a great many things. They will eventually die, though.
C1sc0cat 7y ago
Normally caused by producing bad products, some wacky massive change to the business model or losing a government contract.
duxup 7y ago
It feels like the sales are hard to predict have something to do with guns in the US being ... almost borderline fashion items in terms of how people decide things. Like there's a lot of discussion about usage and practicality among gun enthusiasts, but when they buy their 3rd or 6th gun ... I suspect the decisions are more about difficult to predict things and whims. It is a strange market.
- paulddraper 7y ago
  I'd describe it as less "borderline fashion" (which any hobby has) more as legal caprice. Historical examples: * The Firearm Owners Protection Act banned machineguns manufactured before 1986. * The Federal Assault Weapons Ban banned certain semi-automatic weapons excluding those manufactured before 1994. Firearm hobbyists need decade-plus forward thinking predictions. What's today legal is a felony tomorrow, unless steps are taken now. This makes it a volatile guessing game, even more than other hazardous hobbies (cars, aircraft, martial arts, motorcycles, etc.).
  - duxup 7y ago
    I'm not sure I understand. You see popular revolvers selling well... nobody is buying those based on the law.
    - paulddraper 7y ago
      Historically, politically-related events do in fact play a large role in gun sales. There were lengthy and severe shortage of small arms and ammunition following both Obama's election and the Sandy Hook shooting, especially .22 caliber ammunition. [1] I don't think .22 ammunition is on the chopping block, but there's a general positive feedback loop, like a bank rush. [1] https://en.wikipedia.org/wiki/2008%E2%80%9313_United_States_ammunition_shortage https://en.wikipedia.org/wiki/2008%E2%80%9313_United_States_...
      - dfrage 7y ago
        .22 ammunition uses rimfire priming, which requires unique machinery which as I recall no US company dared to buy more of, as mentioned in the Wikipedia article you linked to. Existing US 3 billion rounds per year + foreign imports couldn't keep up with the demand, which also seems to have included a lot of new gun owners, buying .22 models like their main guns or conversion kits for cheaper practice. Perhaps related to this scam, I don't remember any company other than Remington building out a major increase in capacity, that article mentions their $32 million plant expansion. Companies were reluctant since they didn't know when demand and supply would get back in sync, I would also wonder if smokeless powder capacity was a factor, there aren't very many companies that make it.
ryanmarsh 7y ago
This is not at all the case for Remington, who enjoys name brand status with long respected product lines. I got my first 870 pump shotgun at a Wal-Mart 30 years ago, as of last year Wal-Mart was still selling them. It was a great gun. I love it. The only reason people stopped buying them is quality went down as they were sucked dry by a PE firm.
cascom 7y ago
Not to mention as consumer products go they are incredibly long lived, I can’t think of many activities where someone might still use their grandfather’s [tennis racquet, golf clubs, etc], but you regularly see people still using 50-75 year old guns (if not older)
- DuskStar 7y ago
  It doesn't help that a lot of the "fun shit" is restricted to those older guns, since they've been grandfathered in during the US's various prunings of gun rights. So a 50 year old gun might be legitimately superior to one manufactured this year, which causes all manner of weirdness.
  - wl 7y ago
    What kind of "fun shit" are you thinking of? Select fire is rare and expensive. Open bolt semiautomatics? Eh, some people are into collecting such things, but closed bolts are just as fun to shoot. Just about the only somewhat reasonably priced grandfathered "fun shit" are pistols that can take stocks and not be NFA SBRs.
    - DuskStar 7y ago
      Select fire is rare and expensive for legislative, not practical, reasons. And it is VERY fun, if not particularly useful. It's a large part of what I was thinking of. Why would the price matter?
      - wl 7y ago
        If we're having a discussion about long-lived firearms having an effect on the market for new firearms, select fire is so rare (175,997 pre-86 transferrable as of February 2016[0]) as to be irrelevant. [0] https://www.nfatca.org/pubs/MG_Count_FOIA_2016.pdf https://www.nfatca.org/pubs/MG_Count_FOIA_2016.pdf

Blackthorn 7y ago

There's a certain amount of poetic justice here for Remington, seeing as how they acquired Marlin and then fired all their expertise, completely ruining the brand. Good riddance.

sparrish 7y ago
Agreed. This isn't a unique tale for a firearms manufacturer. This is a common tale for nearly any type of manufacturer that is bought out by private equity firms. They reduce costs and quality, load it with debt, suck it dry, and then dump it on their creditors.
- bluejekyll 7y ago
  I’ve read about this scenario many times, but I’m curious about why any creditor would lend money to a company that’s poised to do this. Wouldn’t these private equity firms lose the ability to borrow money based on past practices like this?
  - Spooky23 7y ago
    Read the toys r us threads here on Hacker News from a year ago to understand. The cult of modern business thinking blinds folks in business from the obvious stupidity of the private equity business model. Self dealing almost never ends well.
  - refurb 7y ago
    Lenders lend money because it's not always a failure. Lenovo is a great example of a successful PE strategy.
    - kgwgk 7y ago
      HN (and the world in general, I guess) has a tendency to focus on the successful VC outcomes and the PE failures.
  - ptah 7y ago

kevin_b_er 7y ago

Not a mystery: Private equity firm bought them out with borrowed money, raided their resources to enrich themselves, then left Remington to rot. It is a common story now. The private equity firm makes a bunch of money and people are jobless.

mobilio 7y ago
Who said greed good?
mkeeter 7y ago
I like Jason Scott's take on it [1]: "I wonder how many times we're going to keep seeing news media post these sorts of news stories as a 'woah, a tornado hit this landmark' without including one single line about 'the landmark was put in the care of a tornado factory a few years back and never saw another repair'" https://twitter.com/textfiles/status/1096630478965260289 https://twitter.com/textfiles/status/1096630478965260289
- deleted 7y ago
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rtpg 7y ago
I get that money is money, but I feel like we desperately need to make conflict of interests prosecutable, so we can kill the self-serving mess that are LBOs. In what universe is "I borrow a bunch of money, buy a company, then force the company to basically borrow money from me" a value-creating operation? Cuz it sure isn't this one.
- radiator 7y ago
  Interesting ... "money is money". But what exactly is fiat currency? Some would say it is not really money.

axaxs 7y ago

> A plunge in NIC checks foreshadows a corresponding plunge in gun sales I'm curious about this statement. NIC checks are, as the name implies, instant. They happen upon transfer of ownership of a firearm from an FFL dealer. So I'm not sure how they 'foreshadow' sales, more likely they mirror sales. In fact, when you purchase a gun online, the sale occurs before the check...

madengr 7y ago
Also, with the number of CCH licenses, those don’t needs a NICS check.
- lostapathy 7y ago
  That of course is state dependent - not all states carry permits get you out of the NICS check.
  - dfrage 7y ago
    And in the other direction, fewer states are requiring a permit, so no doubt some people are not bothering to renew their permits.
jkubicek 7y ago
I don't know for a fact, but I'm guessing it's because theres a lag in the supply chain. NIC checks may instantly reflect a drop in sales at individual stores, but it will be a bit before that drop works its way back up through the suppliers and distributors to Remington itself.
aparks517 7y ago
NIC happens at retail. I suppose it would take time for retail sales volume changes to ripple back through the supply chain, so maybe manufacturers view it as a leading indicator.

paganel 7y ago

> Because private-equity firms appear frequently as villains in the press, many people assume that they cater mostly to the superrich, earning high returns on investments for billionaire clients. They do. But by far the most important piece of their business — 48 percent, according to the data-analytics firm Preqin — is investing capital for American pension funds. This doesn't get mentioned often enough when talking about the "1-percenters" and the wealth gap in Western countries, i.e. that most of the capital behind all of the current economic and social system is directly or indirectly held by part of the general populace itself. The issue is of course that the other part of the populace (generally speaking people under 35 who cannot put money towards their retirement funds or who can only get temp jobs) are not part of this financial arrangement and, as it so happens, are also some of the worst affected by the current economic set-up (those temp jobs I was mentioning are not as great as the normal full-time jobs held by people whose pension funds are managed by the companies investing in Cerberus). Afaik almost no politician has focused on this social and economical contradiction, if I may call it this way, some of them are putting whole of the blame on the 1-percenters, some of them are choosing to ignore it all together, but almost no-one has actually looked at the real numbers. And the real numbers tell the story of a society divided in two, a part that will manage to enjoy its pension and the other part that has no clue how will pay for its old age.

stvswn 7y ago
I think your point ignores that there's a mandatory federal pension system w/ a minimum benefit that people who don't save in private pension plans or who may only have temp jobs do contribute to, and will draw from in old age. It's true that it's not fully funded, sure, but if it didn't exist it would be the obvious policy solution to the problem you're describing.
godzillabrennus 7y ago
I’ve been shocked to the extent politicians haven’t focused on the lost tax revenue from the gig economy. I’m certain it’s caused a drop in tax revenue from what would normally constitute middle class tax payers.
- 7y ago

madengr 7y ago

Remington just doesn’t have that many interesting guns. There are a ton of firearms manufacturers in the last 20 years. I’m guessing the AR-15 market alone is billions in revenue.

ARandomerDude 7y ago
And their quality has plummeted the past few years. I had an AK that could out-shoot my Rem 700 no matter what I did to it, and my 870 would only reliably eject Remington brand shells. Sold both, will never buy Remington again. Really a shame. Both of those were excellent guns back in the day.
- ryanmarsh 7y ago
  That's sad. The 870 used to be the AK of shotguns. I beat that that gun like it owed me money and it kept cycling and shooting fine. The 700 used to be weapon of choice for many snipers. Hard to imagine today.
  - lostapathy 7y ago
    Not all (current) 870's are even created equally. The cheap one at a cabela's and a police model from a gun store are totally different leagues.
  - SlowRobotAhead 7y ago
    Almost all snipers in the US military today are still using a some Remington 700. The Mk13 which is expected to replace the Marine's scout snipers M40 is 700-pattern, just not built by Remington. You're going to be right soon, just not yet. Likewise, "The Military" is still using Rem 870 and Mossberg 500 shotguns. The "other military" that is, the IRS, Deptartments of Interior, Energy, Education, and everything else; their SWAT teams all use the Rem 700 and 870.
    - walshemj 7y ago
      They haven't switched to Accuracy International sniper specific rifels - the classic British two guys in a shed company.

johan_larson 7y ago

How are these strip-shops able to resell the heavily debt-burdened companies they create? That's the part I don't get.

stcredzero 7y ago
A historic, household name helps.
cascom 7y ago
Buy 20 companies, execute private equity playbook. a few are zeroes, most make 1-5x over 3-5 years...
airstrike 7y ago
They sell it to another sponsor who thinks they can do more with it. But by and large most private equity shops are not in the business of asset stripping. Those deals just don't make the news and the average reader is oblivious to them

dba7dba 7y ago

At this point, I feel most employees of a business that's up for sale should just put their foot down and say no to selling the company to any private equity firm. The owner can say, hey I worked for this and I need to exit with a plan. Well, the employees can say we worked for this and we need to make sure we will have our jobs in 5 - 10 years. I am working in a company that used to be privately owned, and was sold to a PE. It happened before I joined. The ones who are still here tell me the night and day difference in how the employees are treated before and after the sale. The treatment I'm talking about is how the employees are compensated.

sara17378 7y ago

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_bxg1 7y ago

"Financial engineers" aren't interested in building a sustainable business; they want to play a game cleverly, make a cash-grab, jump ship, and leave thousands dealing with the fallout. It's a similar short-term strategy to that taken by many SV founders who build a company only to sell it, though obviously the latter don't cause nearly the same degree of harm to society. But they still pass on opportunities to create actual value and jobs, in favor of making a quick buck and moving on to the next exploit. It's the mindset of locusts.

iscrewyou 7y ago
I love the term financial engineers. In my head, it defines the person, the procedure, and the purpose.
- _bxg1 7y ago
  The problem with engineers (speaking as one myself) is that we're prone to focusing only on the mechanism itself, abstracting away the details and ignoring the parts of the system we can ignore. In software we can often get away with this because the rest of the system is just further machinery; there are benefits to taking it into consideration, sure, but nobody gets hurt when you don't. But business and finance are not software. Their systems are made of people. When you waste a CPU's time by ignoring its nuances, you simply get less out of it. When you shuffle money around, writing off the nuances of industry and economics as blips in a monetary machine, you destroy lives. I understand the appeal of the engineering mindset, but you have to be a psychopath to continue in it while leaving such destruction in your wake.
  - iscrewyou 7y ago
    I know and I agree. And a software engineer is much different than a mechanical engineer or a civil engineer. I guess I should’ve mentioned that the term financial engineer gives me context or a reference point where I can see that they are behaving like engineers. My comment was more focused on their behavioral mechanisms.

airstrike 7y ago

inb4 private equity is evil and we should kill all financiers Please don't throw the baby out with the bathwater

sn0n 7y ago

I especially liked this bit "The pension fund for the Boston-area public water utility invests in Cerberus. The California State Teachers’ Retirement System, CalSTRS, is a Cerberus client, as is a pension fund for the Presbyterian Church as well as many university endowments, sovereign wealth funds and philanthropic foundations." Made me chuckle a bit inside, as I know a couple people who are less on the side of guns, as they are more on the side of teaching, who would be dying inside knowing their retirement money is used like this.

elamje 7y ago
There are so many people that view investing like this. It's best to leave your morals and worldview to the side when investing, or letting others invest on your behalf.
MrMorden 7y ago
American universities have rushed to move as much lecturing as possible to adjuncts, and cap as many employees as possible at 29 hours/week to avoid the ACA. Just like with a fire-and-brimstone televangelist, it's only immoral if other people do it.
- username223 7y ago
  > American universities have rushed to move as much lecturing as possible to adjuncts... it's only immoral if other people do it. No, it's just plain immoral, not to mention short-sighted. American primary and secondary schools are also squeezing their teachers, by hiring Filipinos on J-1 visas, just like tech companies do with H-1Bs. It's a bit like like making room in your fridge by pushing everything back, then adding new stuff. It works for awhile, but eventually leaves you with a mess of spoiled milk and rotten vegetables in the back. You can only strip-mine a hill for so long before it's gone.
Rebelgecko 7y ago
CalPERS rejected a push by the state treasurer to divest from gun companies that make guns or gun parts that are illegal in California. I don't think STRS has had the same push for divestment, but they're known for taking a more activist approach. IIRC CalSTRS actually has multiple employees whose entire job is to lobby gun companies to change their policies. Of course that sort of political and shareholder pressure is what led Smith and Wesson to start putting integral locks in the frame of their revolvers. That decision has had an almost universally negative response from their actual customers— those in-frame locks have a tendency to get rattled around by recoil and freeze the gun in an unsafe state.

legitster 7y ago

Yet another leveraged buy-out. Are there any business cases where one of these panned out well?

closetohome 7y ago
Depends who you ask.
mrfredward 7y ago
Leveraged buy-outs started off well enough. The original idea was something more like this: Old-timer spent years building a business, now it's worth about 2 million bucks and he wants to cash out. His young, motivated #2 in command wants to take over, and after years of saving has $200k. Old timer goes to the bank, takes out a $1.8 million dollar loan against all the business's assets, with the debt being the businesse's obligation. Older timer has the business pay him a one-time, $1.8 million dividend, and then sells the business to #2 for $200k. If business stays steady, the company's profits pay off the loan and everyone lives happily ever after. As a way for old-timers to retire and pass on control of small private companies, LBOs are really useful. The problems started in the 80s when private equity firms realized they could sell enough junk bonds to do LBOs on giant publicly-traded companies.
cascom 7y ago
well CalPERS net IRR investing in private equity is 10.7%... so yes Also to the two cerberus funds in which it has invested are have produced 14-17% IRRs https://www.calpers.ca.gov/page/investments/asset-classes/private-equity/pep-fund-performance https://www.calpers.ca.gov/page/investments/asset-classes/pr...

matthewaveryusa 7y ago

The part I don't get is how Cerberus made money. It seems like it was a zero-sum for Cerberus. They loaned the holding company 225M, and presumably got that money back through the holding buying the stock back from Cerberus after the holding sold the 11% corp. bonds. Is it that between when the holding bought the stock back from Cerberus and Cerberus (via the holding) sold the bonds Cerberus had control of Remington (via the holding stock) and therefore effectively sold Remington's assets, paying themselves through the holding's stock. Then, when Remington was valueless, the holding bought the stocks back from Cerberus as if Remington still had value leaving the bond holders hanging? That's such a dumb scam. Why would anyone buy those bonds, and how was Remington able to get a loan to buy the holding's stock if Cerberus raided it?

CalChris 7y ago
Cerberus buys Remington for $118M in cash and assumes $252M in Remington debt. Except that it wasn't Cerberus, it was a Cerberus subsidiary S which Cerberus owned with stock X. Then Remington borrowed $225M which it transferred to S which then bought back its stock X from Cerberus. Cerberus is then out of the transaction with $225M - $118M. Remington + S (which Cerberus no longer owns) has $252M + $225M in debt.
- sigstoat 7y ago
  > Then Remington borrowed $225M which it transferred to S which then bought back its stock X from Cerberus. hmm. so, who is willing to loan Remington $225M in that situation? it seems like "recently bought by private equity company known for shenigans" would discourage banks and prospective bond purchasers?
  - CalChris 7y ago
    the holding company offered a generous interest rate of around 11 percent. When the interest payments were due, the holding company paid them not in cash but with paid-in-kind notes, that is, with more debt. Who could refuse such a deal?

lph 7y ago

These private equity scams seem to revolve around borrowing money, transferring the debt to a separate legal entity that then declares bankruptcy, and pocketing the money. If that’s true, then it would seem that creditors (and AL taxpayers in this case) end up holding the bag. How are savvy lenders falling for this?

boshomi 7y ago

the finitude of being Companies are man made so the have a limited live span. There is no exception, every man made organisation will end. While this is sad for every single case, the finitnes is a good thing at all. Thinking on finitnes of companies, stock market indexes have a mathematical limit.

brainfeed0 7y ago
They are living things. But also, greedy bastards can take living, thriving businesses into the embassy in Istanbul, chop them up and sell the pieces for profit.

nn3 7y ago

Sounds good to me. Essentially it ended up being an ethical investment. I hope Cerberus can use its "methods" on more gun makers.

mahgnous 7y ago

JFC tl;dr.

KorematsuFred 7y ago

This is sad to know. Back in India we owned a Remington rifle which was like 80 years old and still worked really well. No Indian made rifle could match its reliability.

bayareanative 7y ago

Vulture cannibal capitalists don't care who or what they destroy, as long as they make $.

brainfeed0 7y ago
Yup. Wonder if there's any co-op / worker-owned medium-sized firearms manufacturers that are US-based?

elchief 7y ago

The theory behind this is, a stable company should have plenty of debt, as it can easily pay it off (because it's stable), and is generally cheaper than equity. A company should also have only as much cash as it needs, else management will waste it So a private equity company sees a company like Remington, with too much cash and not enough debt. It borrows a lot, buys it, and minimizes cash reserves. This tends to increase the market cap substantially However, this obviously has some downsides, if you don't get the default risks just right...

kyrieeschaton 7y ago

Remington's product quality went way south soon after the acquisition and hasn't really recovered. When you have a very traditional market for your products (many firearms designs are decades old), those products are expensive, and potentially designed to save your life or at minimum contain tens of thousands of PSI inches from your face, losing your reputation for quality is a death sentence, and due to the capital costs, you're unlikely to be able to squeeze out cash by burning your reputation.

needaccount 7y ago

Anyone know a convenient summary showing Cerberus total cash flows and net earnings for the full time?

taksintikk 7y ago

Thoughts and prayers

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