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I hear that private equity doesn't always result in the 'load with debt, take profits, walk away' playbook, but many of the famous examples (Sears, Toys R Us, t
by baldeagle 6y ago
I hear that private equity doesn't always result in the 'load with debt, take profits, walk away' playbook, but many of the famous examples (Sears, Toys R Us, this article) seem to all be of that playbook. I wonder what kind of regulation could be created to prevent this activity while preserving good management and not overly penalizing bad luck or bad timing.
Something like a time bound window were the principle beneficiaries have to repay their profits extracted, with actual federal prison time as a likely possibility. Wouldn't take too many examples of prosecuting the most egregious folks before the entire sector cooled.
The counter argument is that this action accelerated the 'creative destruction' that capitalism is known for - where weak companies are harvested by the an apex predator for profits before being committed to bones. But I think that ignores the real societal impact of some of these, specifically in this example where marginalized groups have lower access to health care and standards. If we can eminent domain private property to give to private groups (because the extra taxes and jobs are a public good), couldn't we also take a stronger hand in regulating some of these private equity actions because of the destruction of public good (and taxes and jobs, etc?)
- pnutjam 6y agoThey don't "destroy" the company. They hollow it out and walk away before it collapses into itself.
- fakedang 6y agoIt's funny how Neumann got kicked out of WeWork, and how much backlash WeWork received since, when most PE firms pull the same shit every single time. It's either the hollow-out-and-destroy playbook, or the raise-prices-then-sell-back-to-government playbook for all of these firms. Glad to have left that world. Oh, then there's the milk-as-much-as-you-can-from-govt playbook. An example, SL Green, which advertises itself as NY's largest commercial real estate firm, applied for the federal aid package as a "small business".
- LorenPechtel 6y agoWhat I would like to see is a law that if you have debt other than accounts payable that are current that you can't pay dividends, period. If a company is truly growing well investors won't mind them taking on debt to grow and not paying dividends. If it's not growing why should it be taking on debt? I would grandfather existing debt, however, to avoid disrupting the market too much. I would also like to see dividends only able to be paid from profits, period, no grandfather. You didn't make money, you can't pay out dividends.