If a company can issue stocks or bonds and needs to raise money, it should issue stocks/bonds instead of getting bailed out by the government. If no one's buying, talk to the Fed.
This x 100.
Private Equity Wants in on the Bailout? Spare Me
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Re: Private Equity Wants in on the Bailout? Spare Me
#22If a company can issue stocks or bonds and needs to raise money, it should issue stocks/bonds instead of getting bailed out by the government. If no one's buying, talk to the Fed.
And all government bailouts should be in the form of stock purchases by the government. A company that gets bailed out too much should be effectively nationalized IMO.
Re: Private Equity Wants in on the Bailout? Spare Me
#23If a company can issue stocks or bonds and needs to raise money, it should issue stocks/bonds instead of getting bailed out by the government. If no one's buying, talk to the Fed.
The problem is they were already operating on razor thin margins. Imagine people walking through their lives with only $10 of savings, and hundreds of thousands of dollars in debt. First time something happens, boom, you go bankrupt. Same with PE companies. They leverage up to the highest possible values, and then a bit more. They knew the risks of doing so, but the risks were worth it because they would make so much…
>> In fact, is there something we can do to PREVENT these colossal leverage figures? Banks don't care, regulators can't do much about it, PE companies don't care, the companies being bought out don't have a say, and neither consumers.
Yes there is -- let them fail if they cannot service debt. If you bail them out, it only fosters the behavior further.
Re: Private Equity Wants in on the Bailout? Spare Me
#24Earlier quoted context omitted.
The problem is they were already operating on razor thin margins. Imagine people walking through their lives with only $10 of savings, and hundreds of thousands of dollars in debt. First time something happens, boom, you go bankrupt. Same with PE companies. They leverage up to the highest possible values, and then a bit more. They knew the risks of doing so, but the risks were worth it because they would make so much…
It's disingenuous to say PE doesn't care. They have every incentive to preserve and generate equity value. That is literally their business. However, the issue is employees are also hurt, not just equity and debt holders. Edit: I don't see how you can disagree with this statement. Literally the only job of a PE firm is retain and create value for investors. They would be out of business if they did not do that. Hence…
>> It's disingenuous to say PE doesn't care. They have every incentive to preserve and generate equity value. That is literally their business.
This might be the headline intent for the public, but in practice has often not been the primary intent. PE firms often extract massive fees from the companies to recover their initial investment -- long before they realize equity based gains. I'd say VCs are more aligned on this matter, not PE.
Re: Private Equity Wants in on the Bailout? Spare Me
#25Earlier quoted context omitted.
The problem is they were already operating on razor thin margins. Imagine people walking through their lives with only $10 of savings, and hundreds of thousands of dollars in debt. First time something happens, boom, you go bankrupt. Same with PE companies. They leverage up to the highest possible values, and then a bit more. They knew the risks of doing so, but the risks were worth it because they would make so much…
> "In fact, is there something we can do to PREVENT these colossal leverage figures?" yes, at least these 3 things: * remove the tax advantage of debt over equity (currently debt payments reduce tax burdens). * remove the tax advantage of capital gains over ordinary income. * on any bailout, massively cram down the equity holding of the PE firm(s) and all executives by issuing new shares to every other stakeholder be…
> on any bailout, massively cram down the equity holding of the PE firm(s) and all executives by issuing new shares to every other stakeholder besides them, including other shareholders
IMO that's a step to far, and is a totally uneven punishment depending on how shares are held. Just make them give the government equity (or options) as part of the bailout that would dilute all existing shareholders.
Executives aren't the only ones responsible, they are hired by the shareholders.
Re: Private Equity Wants in on the Bailout? Spare Me
#26Earlier quoted context omitted.
It's disingenuous to say PE doesn't care. They have every incentive to preserve and generate equity value. That is literally their business. However, the issue is employees are also hurt, not just equity and debt holders. Edit: I don't see how you can disagree with this statement. Literally the only job of a PE firm is retain and create value for investors. They would be out of business if they did not do that. Hence…
>> It's disingenuous to say PE doesn't care. They have every incentive to preserve and generate equity value. That is literally their business. This might be the headline intent for the public, but in practice has often not been the primary intent. PE firms often extract massive fees from the companies to recover their initial investment -- long before they realize equity based gains. I'd say VCs are more aligned on…
That is simply not true. Management fees are such a small percentage of contributed capital. And, typically doesn't count towards your returns calculation.
Re: Private Equity Wants in on the Bailout? Spare Me
#27If the real goal here is to save jobs, this is all completely irrelevant.
Has PE had a history of net job gain, or at the very least saving the jobs that were already there?
My impression, without any data on hand, is that PE firms tend to reduce the number of jobs overall.
Re: Private Equity Wants in on the Bailout? Spare Me
#28Earlier quoted context omitted.
The problem is they were already operating on razor thin margins. Imagine people walking through their lives with only $10 of savings, and hundreds of thousands of dollars in debt. First time something happens, boom, you go bankrupt. Same with PE companies. They leverage up to the highest possible values, and then a bit more. They knew the risks of doing so, but the risks were worth it because they would make so much…
>> In fact, is there something we can do to PREVENT these colossal leverage figures? Banks don't care, regulators can't do much about it, PE companies don't care, the companies being bought out don't have a say, and neither consumers. Yes there is -- let them fail if they cannot service debt. If you bail them out, it only fosters the behavior further.
Couldn't the same be said for highly-leveraged workers?
Re: Private Equity Wants in on the Bailout? Spare Me
#29What I learned in school growing up was that if I lose a bunch of money gambling at the casino with my credit card, I don't get a free bailout from the government. But maybe things have changed?
Re: Private Equity Wants in on the Bailout? Spare Me
#30Earlier quoted context omitted.
>> In fact, is there something we can do to PREVENT these colossal leverage figures? Banks don't care, regulators can't do much about it, PE companies don't care, the companies being bought out don't have a say, and neither consumers. Yes there is -- let them fail if they cannot service debt. If you bail them out, it only fosters the behavior further.
Couldn't the same be said for highly-leveraged workers?
What is a highly leveraged worker? Is it someone that has no savings account? If so, what does letting them fail look like to you?
To me, letting an over-leveraged worker 'fail' (starve, die, become homeless, whatever it is) is categorically different than letting an over-leveraged business fail.