TIL that Toys R Us wasn't killed by competition, but by private equity companies

Not defending PE, but there are situations where this type of thing would make sense. If the rates were low enough a company could cash out it's property value using something like this and use the cash for an expansion, to make a moonshot investment, or maybe as a last ditch to survive in a downturn.

That's not what's happening here, but turning real assets to cash through debt to then invest in the business is a decent tactic.

It would make sense for me to sell my apartment and rent it back because I get fucked by ODSP if I take a roommate while I'm an owner and I can't afford to live here alone.

It would make sense for an entity that needs to make use of their equity for other things. Many many individuals and companies mortgage their properties or get secured loans. That's basically the same thing.

If you’re a business owning a building, maintenance is another thing you have to take care of as well as the business. If you’re not equipped to maintain the building or pay people to do it, then it might be better to rent and have the landlord take care of that stuff.

My union is selling our building because it wasn’t really anybody’s job to keep up on maintenance for the last 30 years. Now people that care are in there and they got estimates and whatnot, and it came to like a $600,000 bill to get it all caught up.

So we’re partnering with a local non-profit and moving our office in to their space with meeting rooms and whatnot that we can share. We have one meeting a month and training sessions already happen elsewhere. All of work is done away from the building aside from 3 people in the office full time, so it makes sense in our situation.

No, no companies are people. Buying and selling them is slavery.

Citizens United has entered the chat

The very first words of US law:

1 U.S. Code § 1 - Words denoting number, gender, and so forth

...the words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals;

I have no idea and it seems insane to me.

I was looking for the same thing in my country, UK, thinking we can’t be as bad as America, but nope many of the companies that have died during my life have been due to LBOs. The world is insane and I don’t see how we can change it.

In the UK I learnt that Asda one of our largest supermarkets is in a similar place due to two brothers doing an LBO to buy it. Now it’s saddled with debt meaning it won’t be able to innovate like Tesco or Sainsbury’s and thus will likely just bleed customers. Makes me wonder why these two brothers with more money than God would want to carry on, like I literally can’t comprehend wanting more than you need. Perhaps I have different motivations as I see time as my most precious asset and will earn less money than I could just for the easier life of being able to chill more and do the things I like.

the primary shareholders of a company can usually do whatever they please (as they should in the case of some proprietorship) as such can sell whatever assets for whatever price.

Because bankers buy politicians and if people complain they buy news coverage to call the naysayers socialists

I'm kind of financially illiterate

what part of the firm's actions were fraudulent? if they make an offer and toys r us accepts, there's nothing predatory going on is there?

So the Equity Holders (The Private Equity firms) were largely shielded from risk as they had taken out billions in dividends and they had a small equity state relative to the debt meaning their downside was limited.

The creditors (large banks) were left holding the bag, but they’d had years of interest payments so they wrote off the rest and likely still made some profit.

Employees, suppliers, and landlords. Employees lose their jobs, suppliers get pennies on the dollar for what they’re owed and landlords might have got some money but still not all.

So in short it was the banks, but don’t forget they had years of interest payments and after all they took the risk.

Companies are valued by earnings-per-share, independent of the assets. So if the P/E ratio is too low the company costs less than its assets and it pays off to sell the parts.

https://en.m.wikipedia.org/wiki/Price%E2%80%93earnings_ratio

In this case I heard a rumor that Amazon did it to dominate the toy market, so losses could have been acceptable.

Alot of debt gets bundled into bonds or other investment vehicles and sold. So small retail investors, retirement funds, etc end up holding the bag. Sometimes the banks lose, but they can take tax write offs and if the loses are too great, they can often get bailed out by the government.

Most debts are owned by the banks and the banks eat it. Then they have to make up the money somewhere else, so the costs go to the next round of borrowers, who then have to charge higher prices, so in the end we the consumer end up paying for it.

Impossible! Mitt Romney is one of the good conservatives!

/s because tens of millions of liberals actually believe that it's true.

Just saw this after making my comment. I believe it was.

Bain Capital

Not technically, it was years after he left Bain.

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

Truer now than when Henry Ford said it like a hundred years go.

The SEC exists to shelter Self Regulating Organizations from any threats of democratic governance or law enforcement. Oh ya and to keep up the legalese charade that there literally is no such thing as counterfeit stock (because the Secret Service has purview over counterfeiting for some strange reason)

Fuck the stock market 🖕

Sadly we live in crazy town.

Wait until you hear about using shorts to drive a company out of business or stock buy backs.

Yes, that was one of them.

From OP

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.

The hypersane smart get called crazy by conformists.

I’m not sure what you mean. We have a state pension tied to the stock market.

I also have a private pension too. I don’t see how not planning for retirement can be beneficial?

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.

EA was down the path of being awful, long before that. But yeah...

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.

If EA gets bled dry by private equity, it'll probably be the biggest company to go down that way ever.

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.

What’s crazy is that the Catholic hospitals are becoming your best bet.

So you’re kinda right!

Careful now, they're about to classify criticism of capitalism terrorism.

Nono its the best system. All others have failed. You cant have the American dream without capitalism.

/LIES FROM FASCISTS

Capitalism is a great system as long as it’s regulated. It’s been more and more destructive and caused catastrophic shifts in wealth distribution since deregulation started with Reagan

The culture of consumption is the greatest threat to humanity.

Capitalism, and even communism, are just means to that end.

Whatever he didn't got fucked by Clinton.

He died before Epstein Island was a thing, presumably.

Your mom.

And the same thing happens to banks for people with mortgages.

In this scenartio, the Landlord also owns the maintenance company, so the renter pays the wages of the maintenance advisor and maintenance costs.

the same happens to most mortgages, namely income goes to the lender and you get a house.

I couldn't possible know what you mean, but that sounds delicious.

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.

Because of course it was Reagan.

Well, you wouldn't want those politicians to be poor?

Glad I stopped caring about the game industry.

Now it's just fun to laugh and point the finger at all the morons/losers getting taken advantage of for being stupid.

Ummm private equity firms have been evilly destroying companies since the early eighties at least.

I hate to tell you this but private equity has been a problem long before the Internet went mainstream. I think venture capital firms we're a product of a post-WWII world trying to capture as much wealth as possible during reconstruction. I'd have to check some sources to be sure of that and I'm really not motivated enough to do it.

Don't see how the internet plays a role in firms purchasing stuff then gutting them for profit.

Nah. They have deluded themselves with ideas of "rescuing" the company. But they protect themselves financially first. Then they don't have the awareness to show that a business could have just made 1-2% a year forever instead of selling off assets for a chance at 4Xing their investment. They think its how life works. Take the big risk and never consider the costs as long as your ass is covered.

One of the reasons they have so much money is the financial trickery that private equity employs

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.

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

I'm not sure honestly, I know venture capitalists buy companies usually with the intention of expanding or helping grow, but lately it seems like they pass around their debt, force them to bankrupt, liquidate and kill it.

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