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Private Equity Wants in on the Bailout? Spare Me

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131–136 of 136 posts

Re: Private Equity Wants in on the Bailout? Spare Me

#131

I feel like this whole thing is a sideshow. We should "bailout" based on just 2 criteria: * would the business be viable if it weren't for corona and will it be viable after coronavirus? * what's in it for us? We want equity, or juicy interest on the loan or you're industry needs to be a big net contributor of tax revenue. We made a profit on the TARP activities. Let's do that again, then we can cut taxes and expand…

I would add * Is the business important to society as a whole In my opinion, bailouts aren't about if a company "deserves" to survive, they are about if it's "important to us, as a society" that it survives. If so, we group together and save it (with out taxes).

I disagree, but I wrote my comment without explaining why the above should (I think) be the only criteria.

Industries will survive and return to normal if they're economically viable, whether they are socially important or not.

Cruise ships are (imho) floating cess pits that contribute nothing but pollution to our world. So we can just let them go bankrupt right? And they will. Then some billionaires will buy up the ships at auction for cheap, and reopen the same businesses under new names. They will make a killing for nothing more than being in the right place with a billion dollars. The number of ships and shittiness of the industry will not change. Maybe some mom-and-pop shareholders will get wiped out. And we will have missed the opportunity to make a fat profit for tax payers.

That's what's happening here: the bailout will happen either way. But if the state leads it, the state gets the guaranteed profit.

Now is a time to look at the benefit to our countries, not to moralise and let others privatise those benefits just because they're already rich.

Re: Private Equity Wants in on the Bailout? Spare Me

#132

I feel like this whole thing is a sideshow. We should "bailout" based on just 2 criteria: * would the business be viable if it weren't for corona and will it be viable after coronavirus? * what's in it for us? We want equity, or juicy interest on the loan or you're industry needs to be a big net contributor of tax revenue. We made a profit on the TARP activities. Let's do that again, then we can cut taxes and expand…

It is precisely because of the predictable government response to corona that many of these firms are viable at all. That is, many know that they can enter into what is essentially a "bad faith" debt obligation because they know a bailout will likley be available. There hasn't been any real incentive to save or be fiscally responsible since the 90's. Spend as much as possible. Take on as much debt as you can. If thin…

Can you give me an example of companies entering into bad faith obligations over coronavirus? I can see how (especially now) banks take excess risks because they're too big to fail. But I don't think (say) airlines have taken any excess risks or could have reasonable forseen a "once in a century" pandemic...

Also, it seems a bit arbitrary that some under capitalised businesses will be left to fail, while others will make a fortune (hospitals say or toilet paper manufacturing). I wouldn't want to pick winners in normal times. But these are not normal times...

Re: Private Equity Wants in on the Bailout? Spare Me

#133

Earlier quoted context omitted.

It is precisely because of the predictable government response to corona that many of these firms are viable at all. That is, many know that they can enter into what is essentially a "bad faith" debt obligation because they know a bailout will likley be available. There hasn't been any real incentive to save or be fiscally responsible since the 90's. Spend as much as possible. Take on as much debt as you can. If thin…

Quite the moral hazard.

Only if the industry being bailed out can somehow profit from causing the next plague...

Re: Private Equity Wants in on the Bailout? Spare Me

#134

Earlier quoted context omitted.

I don't think you and I know each other, but I'm going to guess that you own shares in hundreds of companies. I'm also guessing that you have never voted at the shareholder meeting of most or all of those companies. Again, just guessing, but I'm guessing that the same is true for most of the people who read this site. And this is YC--all about founders and funders.

> but I'm going to guess that you own shares in hundreds of companies If you count index funds sure > I'm also guessing that you have never voted at the shareholder meeting of most or all of those companies. I generally don't vote, but that isn't because I don't believe in the efficacy of shareholder voting. Just because MY (insignificant) vote wouldn't matter doesn't mean shareholder votes in general don't matter, o…

Exactly, most of the votes don't matter. There may be a big shareholder whose vote does matter, but it's probably the management, look at Google and Facebook. They sold the company and kept all the ownership.

"This is still true in most young companies, which need capital to get going, and in many small ones anyhow. But in most successful American concerns which have grown to maturity, and especially in the very big ones which between them do a very large proportion of American business, the stockholders are no longer in control in any real sense: they are subordinate in authority and importance to the management... ...Suppose a stockholder doesn’t like the way the corporation is being run? Only if he is eccentric, or a special sort of crusader, or a politician (union or otherwise) trying to make a stir, does he try to oppose the management of a really big company. What he does, instead, is to sell his stock and get out... ...Looking at this segment of American business, we would almost find it appropriate to call our present economic system “managementism” rather than “capitalism.”." - Frederick Lewis Allen in "The Big Change: America Transforms itself 1900 - 1950"

Re: Private Equity Wants in on the Bailout? Spare Me

#135
post #69

Earlier quoted context omitted.

No all these companies in need of a bailout are suits without skin in the game. Elon took a big risk with his own money which means you as shareholder of Tesla are shielded from the classic agency problem. Suits empty the company in good times and when shit hits the fan they put their hands in the air and say "well I did my best".

> No all these companies in need of a bailout are suits without skin in the game. You may be replying to the wrong comment. I explained the reasoning for bailouts in general. Your characterization is besides the point. I only gave Tesla as an example of investing based on future expectation of value, similar to the reasoning behind some bailouts. I wish people would stop getting so riled up at the mere mention of Tes…

I hear you and also am against the bailouts. For me personally Elon gets a pass for his reality distortion field. I think when you are trying to bring real change especially in an area where we haven't seen progress for years.

Re: Private Equity Wants in on the Bailout? Spare Me

#136

Earlier quoted context omitted.

> but I'm going to guess that you own shares in hundreds of companies If you count index funds sure > I'm also guessing that you have never voted at the shareholder meeting of most or all of those companies. I generally don't vote, but that isn't because I don't believe in the efficacy of shareholder voting. Just because MY (insignificant) vote wouldn't matter doesn't mean shareholder votes in general don't matter, o…

Exactly, most of the votes don't matter. There may be a big shareholder whose vote does matter, but it's probably the management, look at Google and Facebook. They sold the company and kept all the ownership. "This is still true in most young companies, which need capital to get going, and in many small ones anyhow. But in most successful American concerns which have grown to maturity, and especially in the very big…

Each vote matters equally but bigger shareholders get more votes. By the same token, bigger shareholders get punished more by dilution.
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