Comment Re:Potentially Good (Score 1) 99
The Public Markets have rules and laws that incentivize very destructive and predatory behaviors. Corporations behave like psychopaths to hit quarterly numbers for 'fiduciary duty' laws.
Private assets don't have these so they can build real companies with an eye on the future.
Tell me you haven't been paying attention to the actions of private equity without telling me you haven't been paying attention to the actions of private equity. Vulture private equity is a thing; the basic trick is:
- Buy large, well-known company X with stable but not outstanding economic performance, low debt, and lots of real assets (read: Cheap enough to buy and take private, with lots of collateral available)
- Sell all the real company X assets (buildings, land) to another company, company Y, also owned (directly or indirectly) by the private equity firm or its individual owners, with the theoretical idea that that money can fuel expansion.
- Maybe borrow additional money from company Z (also tied to private equity firm) while you're at it, at above-market rates.
- Lease all the assets back to company X, at exorbitant rates.
- Don't actually expand, just pay all the money acquired from the asset sale to pay the leases and loans over a few years, extracting all of the value from the company as it becomes a hollow shell
- Discover, to your great surprise, that company X, while profitable when it owns its land, is unprofitable when paying insane lease rates for said land
- Regretfully have company X declare bankruptcy, sell off any IP or remaining inventory to squeeze whatever additional drops of blood are left in that stone
- goto #1
They did it to Toys "R" Us, Red Lobster, TGI Fridays, Joann Fabrics, and more. They're doing it to hospitals and housing (but piecemeal, so aside from an occasional hospital failing, it doesn't make a big splashy headline). It's all 100% legal, and morally bankrupt. It's less ethical than the publicly traded companies because the reporting requirements are far lower, the number of interested parties far fewer (no shareholder activism here), and the regulations preventing egregious actions fewer to boot.
Yes, there are privately held companies that are forward-thinking and ethical. Largely because their owners are. Until said owners (or their descendants) decide to cash out, and look who comes swooping in with money to buy them out (hint: it's private equity) and destroy what they built for another quick buck. Saying "private equity is good because good people can do good things with it" is like saying "despotism is good because an enlightened despot can run things more efficiently and morally than a democracy", ignoring that it also gives them the freedom to behave terribly with little or no accountability.