3 ms·

The same as any LBO most likely. They gutted the company and now want to cash out on the public markets. Private Equity is disgusting.

burrows 6y ago
Why is private equity bad?
- dhsysusbsjsi 6y ago
  Basically what the last thread said: the typical pattern is to buy a company, load it up with debt and cut expenditure to make all of the revenue graphs trend up for a few years then sell it to unwary public investors and walk away with a huge profit. A lot of them end up collapsing under the debt a few years later, plus the heavy cutting of capital expenditure (“capex”) leads to a long term declining revenue as they are no longer investing in new products.
  - staysaasy 6y ago
    Exactly, and grandparent post was a great question. Another nasty dimension (in the LBO model referenced) is that by playing crazy financial games the PE firms can often wager very little of their own money AND take money off the table fast by issuing dividends. So it's basically a low-risk / risk-free way to suck the blood out of a company. In my experience whether you think that PE is lawful neutral or flat-out lawful evil tends to come down to your opinion on the most brutal forms of capitalism...
    - Proven 6y ago
      Thanks to the culture of fake money, risks are mispriced and money is cheap. How about somebody recognizes that and blames the Fed rather that capitalism? Also remember that firms can defend themselves from hostile takeovers.
    - devalgo 6y ago
      You might say the only reason it could even be lawful evil is because the PE firms spend lots of money on lobbyists to ensure it stays legal.
- alex_young 6y ago
  You're being unfairly downvoted, because it's a good question, but I understand why people are so abhorrent to private equity. Private equity has a reputation of splitting up companies, firing tons of people, and then selling the parts to the highest bidder, often while taking advantage of a reputation which is based on social capital the brand built before being acquired. Some will say this is a good thing since the company was often failing in the first place, but there are plenty of counter examples where the only motivating factor in the move to PE is greed. Greed isn't always good, even in the context of the boardroom.
- seibelj 6y ago
  If you believe in private ownership of property, then it should extend from an apple to a $100 billion corporation. Someone owns it, they own it. I’ve yet to hear a cogent argument that logically explains the line below which private property is fine, and above which owning something is immoral, other than some fuzzy “it feels like $50mil is too much”. I want to know logically the exact metric where some amount of wealth crosses into evil world. So if you agree private ownership is not the devil, then nothing stops a private group from acquiring a majority stake in a company and running it the way they see fit. And if what they want to do is to fire everyone skilled and run it into the ground - so what? If the need is still there, a new company will arise. If they were too bloated, then cost cutting is good. And if they just middle along doing poorly, then they can’t spin it back out to the public markets and earn a huge pay day (unless the public markets are irrationally exuberant from free money printed by the government, but this is a 2020 phenomena).
  - Enginerrrd 6y ago
    You have every legal right to cheat on your girlfriend. That doesn't make it the right thing to do.
  - tweetle_beetle 6y ago
    Unless there is a robust social safety net, it doesn't take much to go from "fire everyone skilled" to serious effects on the most vulnerable: children, elderly dependents, etc. often reaching far beyond the employee. Maybe the previous owner should've known better, but they made a conscious decision after evaluating the situation. Maybe the new owner should've acted more responsibly, but they made a conscious decision after evaluating the situation. Can you say the same for the people who are told they're fired? They made no conscious decision but are the ones who will have to pick up the slack (until such time that a new company arises, if ever). And, funnily enough, the people who are all for private ownership tend not to be the same people advocating for better social safety nets. If the company was in decline before the purchase, then the end effect could end up being the same. But willfully creating the situation is hardly fuzzy morally. There is almost no way to affect another person's life by what you choose to do with an apple.

burrows 6y ago

Why is private equity bad?

dhsysusbsjsi 6y ago
Basically what the last thread said: the typical pattern is to buy a company, load it up with debt and cut expenditure to make all of the revenue graphs trend up for a few years then sell it to unwary public investors and walk away with a huge profit. A lot of them end up collapsing under the debt a few years later, plus the heavy cutting of capital expenditure (“capex”) leads to a long term declining revenue as they are no longer investing in new products.
- staysaasy 6y ago
  Exactly, and grandparent post was a great question. Another nasty dimension (in the LBO model referenced) is that by playing crazy financial games the PE firms can often wager very little of their own money AND take money off the table fast by issuing dividends. So it's basically a low-risk / risk-free way to suck the blood out of a company. In my experience whether you think that PE is lawful neutral or flat-out lawful evil tends to come down to your opinion on the most brutal forms of capitalism...
  - Proven 6y ago
    Thanks to the culture of fake money, risks are mispriced and money is cheap. How about somebody recognizes that and blames the Fed rather that capitalism? Also remember that firms can defend themselves from hostile takeovers.
  - devalgo 6y ago
    You might say the only reason it could even be lawful evil is because the PE firms spend lots of money on lobbyists to ensure it stays legal.
alex_young 6y ago
You're being unfairly downvoted, because it's a good question, but I understand why people are so abhorrent to private equity. Private equity has a reputation of splitting up companies, firing tons of people, and then selling the parts to the highest bidder, often while taking advantage of a reputation which is based on social capital the brand built before being acquired. Some will say this is a good thing since the company was often failing in the first place, but there are plenty of counter examples where the only motivating factor in the move to PE is greed. Greed isn't always good, even in the context of the boardroom.
seibelj 6y ago
If you believe in private ownership of property, then it should extend from an apple to a $100 billion corporation. Someone owns it, they own it. I’ve yet to hear a cogent argument that logically explains the line below which private property is fine, and above which owning something is immoral, other than some fuzzy “it feels like $50mil is too much”. I want to know logically the exact metric where some amount of wealth crosses into evil world. So if you agree private ownership is not the devil, then nothing stops a private group from acquiring a majority stake in a company and running it the way they see fit. And if what they want to do is to fire everyone skilled and run it into the ground - so what? If the need is still there, a new company will arise. If they were too bloated, then cost cutting is good. And if they just middle along doing poorly, then they can’t spin it back out to the public markets and earn a huge pay day (unless the public markets are irrationally exuberant from free money printed by the government, but this is a 2020 phenomena).
- Enginerrrd 6y ago
  You have every legal right to cheat on your girlfriend. That doesn't make it the right thing to do.
- tweetle_beetle 6y ago
  Unless there is a robust social safety net, it doesn't take much to go from "fire everyone skilled" to serious effects on the most vulnerable: children, elderly dependents, etc. often reaching far beyond the employee. Maybe the previous owner should've known better, but they made a conscious decision after evaluating the situation. Maybe the new owner should've acted more responsibly, but they made a conscious decision after evaluating the situation. Can you say the same for the people who are told they're fired? They made no conscious decision but are the ones who will have to pick up the slack (until such time that a new company arises, if ever). And, funnily enough, the people who are all for private ownership tend not to be the same people advocating for better social safety nets. If the company was in decline before the purchase, then the end effect could end up being the same. But willfully creating the situation is hardly fuzzy morally. There is almost no way to affect another person's life by what you choose to do with an apple.