Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.
Because the company then had to pay off those extreme loans, they were forced to sell off their assets and property, which they leased back from the very private equity firms that now owned them.
The same thing happened more recently with Red Lobster and JoAnn Fabrics.
They told US TARGET killed Geoffrery!!!
Weird. I heard Tyrion did it, but he did claim he was innocent!
Target ended up getting the rights to the brand didn’t they?
What happened to Babies 'R Us? The one near me where we registered for our oldest got turned into a trampoline park. We took him there for his 9th birthday a couple weeks ago.
I watch the YouTube channel “Company Man” that does a bunch of interesting business stories. 95% of the “Decline of (brand)” or “Rise and Fall of (brand)” videos are because of leveraged buyouts.
A group of idiots borrow billions of dollars, throw the unrecoverable debt onto the books, slowly killing the company, and then it’s dead.
Who loans this money? How does that work? I understand the rest of it about being a bastard who collects millions in salary and bonuses while driving a company into the ground. I just don’t understand where the money comes from, or why.
It may be U.S. plutocrat strategy to weaken political enemies by killing their companies.
Consider Microsoft destroying Nokia and their Linux phones to benefit fellow American companies Apple and Google.
Consider the Destruction of OkCupid as an attack against its liberal-skewed user base.
Consider Microsoft destroying Nokia and their Linux phones to benefit fellow American companies Apple and Google.
I’ve considered it, but I do think it was a huge blunder that was planned differently. They invested a bunch of money in Windows Mobile, had a partnership with Nokia and then bought their mobile business… And then they just gave up, handling their competitors in other markets (Apple being a competitor to Windows and Google at the time being already a competitor to Office) a win. I suspect they actually had faith in Windows Mobile and wanted to fuck up Nokia and buy their phone business so they could sell Windows Phones.
The best book I’ve read about private equity is called Songs of Profit, Songs of Loss by Daniel Souleles. It’s an ethnography of private equity.
Private equity is the logical extreme of the idea of shareholder value. Companies are bought, stripped for parts, and mined for resources. The money comes from wealthy people and institutional investors like university endowments, pension funds, etc, and some years it is a very high-return investment. Other years, not so much, see the relationship by the University of California and Blackstone as an example in recent years.
Oh it is real simple. Imagine you have a really nice truck that is all jacked up with a lift, big tires, light bar, supercharger, etc.
I want to buy it and you want $10k for it since it is an older model and most of it’s worth is from the accessories. The problem is I don’t have $10k. I only have $2k.
This is where the magic happens. I find some someone who will buy all your accessories for $8k. I make a deal, let me strip your truck and I will pay you $10k for it.
You agree and I come over, take off all the accessories and then sell them for $8k and then buy your truck for $10k.
The truck is pretty worthless at this point without wheels or anything, but I can sell it for about $3k. Well, I ruined the truck and made a thousand bucks. This is a silly example of how they get the money.
Yeah, this is the case for most “public to private” company moves, and other types of private equity acquisition deals. They are all just a massive shell game to liquidate a company’s value and transfer it to those private equity companies. Vulture Capitalism
Comical to read this when I just saw a $50 billion dollar sale of EA going private being bought by private equity firms, haha.
I don’t really know if that’s the same kind of animal though. The Saudi royal family is trying desperately hard to diversify. Into as many different revenue streams as they can. You know to Stave off the coming disaster. So I think maybe they’re actually in it for real with EA, though why you bank on a video game company being a long-term investment I’m not 100% sure. Point is they have so much money now I doubt it’s for a quick profit. They have so many projects right now that are so risky they’re basically burning cash.
When you think about how much money EA’s main soccer title makes from microtransactions alone, it certainly makes sense to buy them out
Assuming the Saudis buy EA out for 55 billion and earnings don’t change much from now on, they’ll recover the expenses in 9 years.
I was guessing that it was going to be leveraged as a propaganda outlet given the Kushner and Saudi connections, but it does seem more likely that it’ll just be hollowed out and thrown away.
EA was down the path of being awful, long before that. But yeah…
If EA gets bled dry by private equity, it’ll probably be the biggest company to go down that way ever.
Not Sears?
My first thought as well. Of companies to lose to further “investor” shittery, I can’t say I’ll lose much sleep over EA if that turns out to be the case.
vulture capitalism
No other kind. Every major gain is just made by eating a corpse you don’t acknowledge-polluting the air or putting plastics in all our blood or slopping us with malevolent ux and llm’s.
Death Spiral Financing is one of those things that should be shouted from the rooftops by anyone who wants to spread anti capitalism. It so cleanly displays the evil inherent to the system.
A victim of the good ol leveraged buyout which should be fucking illegal right alongside stock buybacks.
This is like me taking out a loan to buy a car and then expecting the car to make the payment.
And since all the debt is on the company and not the people/organization who bought the company, they don’t suffer any of the repercussions of defaulting on the loans. Why this isn’t illegal is beyond me.
It was illegal, then Reagan changed that.
Because of course it was Reagan.
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Well fuck … that’s even more depressing.
Well, in theory it’s the responsibility of the banks to not make bad loans. If private equity passes on their debt to the company they bought, and then that company goes bankrupt and the private equity walks away free, that’s still the bank’s problem and they’re gonna lose a lot of money. Of course the problem is banks have a pretty bad track record about being disciplined with their loans.
Elementary my dear billwashere, in one word: money.
People don’t notice the leeches, so noone cries out. This enables said private equity leeches to
bribe politiciansmake considerable donations to various political action committees. And believe it or not, politicians like money.Well, you wouldn’t want those politicians to be poor?
Oh deary me, no, poor politicians would be susceptible to bribes
Back to the good old corporate raiders like Lorenzo. For a while there we kept them on a leash. Now with the Land of No Consequences and leashes becoming meaningless these leeches are free to buy and pillage as they see fit. The housing market is gonna be destroyed next, wait until they start selling the homes off to shell companies and taking loans to pay for the deteriorating properties and property taxes (which trump has floated getting rid of to keep these hoarders afloat even longer).
This kind of buyout should be made illegal.
Leveraged buyout is insane and should be so very very illegal.
All we really need is to make sure the people investing in and making these decisions get financially destroyed
Let them leverage but they have to pay it back. None of this transfer the loan shit.
Agreed. If you can take a loss forward 20 years on your taxes, the government should be able to go after leveraged losses for 20 years too.
The fact that they can buy a company by going into debt and immediately transfer the debt to the company is fucking insane. Maybe we need to figure out how we as individuals can do that and just fucking crash the lending industry entirely? Can I make my house buy itself for me and then “whoopsie, the house can’t pay the bills, guess it will file for bankruptcy and hand me a big ol’ stack of cash”.
That’s how landlords work.
Take loan, buy houses, house has to pay back loan via rent, rent is paid for by renter.
Landlord gets house for free, everything paid by renter.
In this scenartio, the Landlord also owns the maintenance company, so the renter pays the wages of the maintenance advisor and maintenance costs.
As usual, renting is one of the biggest scams society has fallen for.
We only accept it as normal because so many people around us are doing it.
And the same thing happens to banks for people with mortgages.
the same happens to most mortgages, namely income goes to the lender and you get a house.
But, you get the equity, and you own the house when (if) you pay off the loan. Renters get nothing.
Renters get a roof over their head (and they should be grateful for that). /s
They will never, ever give us equal rules willingly. The only way that’s going to happen is if we build a new financial system, immune to their Pinkertons and police.
You will not build a new financial system without structures of power. The best we can do is to understand the structures of power and how to combat them.
Structures of power… You mean “guillotines”?
I mean things like this https://m.youtube.com/watch?v=rStL7niR7gs
I mean things like this.
You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.
— Buckminster Fuller
Can I make my house buy itself for me and then “whoopsie, the house can’t pay the bills, guess it will file for bankruptcy and hand me a big ol’ stack of cash”.
2008 called…
I’m not going to say exactly what it would take, but it rhymes with Bolotov Cocktail
I couldn’t possible know what you mean, but that sounds delicious.
Justice often is.
I use fireball in mine. So the revolution will smell like cinnamon.
Fireball and gin. Tastes like Christmas.
It isn’t the only company to die this way. Sears was cellar boxed the same as toys r us. It was what was intended for gamestop but the whole wallstreetbets thing happened and prevented it.
I live in a place that suddenly became a fucking healthcare desert because of this shit. The local hospital network was bought by vulture capitalists who sold the real estate to themselves and then leased it back to the hospitals, racked up enormous debt almost entirely due to obscene bonuses they paid themselves, then declared bankruptcy. The hospitals are all closed now but the vulture capitalists have their cash and still own the real estate. I recently had to spend two days in the ER of a far-away hospital that has been swamped with the overflow, with my mom in a bed in the hallway for the entire fucking time. Muigi Langione is the thing to do.
The methods that they use to do this are crazy (installing a hostile executive, naked short selling, etc), the fact that they got caught while doing it to gamestop caused some crazy shit to be brought to light, and nearly wiped out the entire market
A song as old as time
Time to kill private equity……with crippling regulation and accountability of course
Not when you live in a country where private equity basically owns the government.
Nah just make the rich people pay their taxes. Then they won’t have money for stupid shit like this
One of the reasons they have so much money is the financial trickery that private equity employs
Is this why the one in my area has been closed, but hasn’t been turned into something else? It even still has the signage.
No, that’s because no one has turned it to anything else. So the owners collect a tax write off until they can sell it or lease it. The ones in my area have been long since torn down or remodeled into something else. It took 20 years for all the Kmarts around me to disappear. Large assets like these take time to move and are expensive to acquire. Very few companies are going to jump on them, especially since more often then not, a new building is cheaper then a remodel on a 30 year old one.
yep, had the same thing with Kmart in my area.
it was only about a year and a half ago that something started to renovate the location for a new store, about a year ago for them to move in and open, and about 6 months ago for it to shut down and be empty again
It’s interesting because almost every single one of the Kmarts in my area disappeared right about the same time, and it was about the same time they started building a lot of luxury condos. Once companies realized that they would make a lot more money off of the luxury condo build and those areas were zoned for both residential and commercial they went ahead and acquired the lots tore down the buildings and now almost every single one of them is a luxury condo. There’s only one exception and I think it’s because the state had to take control of it because they rebuilt the highway that was right next to it and increase the off-ramp and on-ramp area and rebuild the road to basically cut across where the parking lot used to be.
Yes
TRU is still in Canada, but its starting to rapidly die all of a sudden.
I just love private equity
