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Instant Pot died primarily due to private equity greed, not because of Instant Pot reliability. In 2017, Cornell Capital bought the company for a total $500M o
by udia 3y ago
Instant Pot died primarily due to private equity greed, not because of Instant Pot reliability.
In 2017, Cornell Capital bought the company for a total $500M of which $300M was financed by debt. Then 4 years later in 2021, it refinanced and added on debt, bringing the total debt to $535M. $245M was immediately paid out to shareholders as a dividend. Cornell Capital got paid back all the cash it invested in the company's acquisition, and then some. In 2023 due to high interest rates the company was no longer able to service its debt, costing the company ~$50M a year, and the company had to file Chapter 11.
- hotnfresh 3y agoWhat are the magic words these people use to get a bank to give them millions of dollars, let them walk off with it, then eat the loss?
- voisin 3y agoThe debt likely wasn’t a normal bank, and the interest rate was likely quite high. The parties making the loan were likely fully aware of the risk and thought the interest rate appropriate compensation.
- teo_zero 3y agoAre those banks the same that failed to recognize what a bad idea it was to bet on sub-prime loans before 2009?
- IAmNotACellist 3y agoThose WERE a great idea--as long as you weren't the one caught holding the bag
- chongli 3y agoWhat I don’t get is why we don’t consider it fraud to knowingly take a loan you have no intention of paying back.
- gruez 3y ago1. It is fraud 2. Is there any evidence that's ever the case from PE firms? Startups fail all the time, but I wouldn't characterize them as "knowingly take a loan you have no intention of paying back"
- ChoHag 3y ago[dead]
- refurb 3y agoIt's call "high risk debt". The high interest rate offsets the likelihood of default.
- sytelus 3y agoWow... I have heard this story so many times. Question is how do you get $300M debt which probably everyone involved knew that it would be written off in short order?
- fuzzfactor 3y agoWhen big money changes hands, at least one person on each end gets a bonus of some kind. When it's $300 million the bonuses can be kind of sizable, so everyone else including the shareholders, be damned. The shareholders don't find out until it's too late.
- thomasahle 3y agoAny chance of the lenders reclaiming some of that dividend money? Or was it paid out too long before the bankruptcy?