3 ms·
Private equity isn't a new idea. "Leveraged buyout" is the old term for it. In the bad old days, the LBO company would issue tons of long-term debt, which the c
by AlbertCory 4y ago
Private equity isn't a new idea. "Leveraged buyout" is the old term for it. In the bad old days, the LBO company would issue tons of long-term debt, which the company would have to pay interest on. To be able to do that, they'd have to lay people off, close unprofitable businesses, and otherwise go on a starvation diet.
For these newer companies, the market cap probably isn't that high, so maybe the big bond issue doesn't happen.
>Grill maker Weber Inc. WEBR ... agreed to go private last year for $8.05 a share, well below its $14 IPO price less than 18 months earlier.
So, they collected a lot of money at $14, then collected more at $8, and in a few years when finances are better, they'll IPO again at $14. Nice business, except for the people who paid them $14 at the first IPO.
- cykros 4y agoI'd be curious if Medium Term Notes have a role to play here, particularly considering the size. A lot of the term benefits of some bond issues, without a lot of the red tape of actually going through a bond issuance.
- chrisgd 4y agoIs it their fault they found someone willing to pay $14/share?
- AlbertCory 4y agoWho said it was? In a traditional IPO, the investors take the management on a road show, where they sell it to the buy-siders. They settle on a price that will clear most of the shares and not leave too much money on the table. Buying an IPO has traditionally been a losing game. There have been brief periods where IPO shares go up enormously on the first day, and an ordinary investor can't even get any. They're like found money for the lucky few. So the people who bought at $14 thought it was the latter case, but it was the former. Caveat emptor