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.
Sweet jesus. How is this not some kind of hyper mega ultra fraud?
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.
It is insane. You’re not crazy, or at least if you are we can be crazy together because I also think the whole thing is rotten to the core.
It’s pretty disgusting what the borgeousie get up to and away with. The whole world is broken. How we have decided society is going to work and run is all one big collective illusion anyways; we might as well make the mirage nicer for the majority of us humans instead of scrabbling like crabs climbing over one another to get to the top.
Anyways, I think part of the problem is once you see the illusion there isn’t much of anything to do about it as an individual because there’s so much going on out of your control.
I think that’s a big part of why we’re seeing more anxiety and depression than ever - because we know how we live (particularly in the west but really almost everywhere) is not sustainable, destroys the environment and causes suffering on a global scale but we keep dutifully existing quietly in the system as the cogs we are.
I like all the stuff I have, I like my car and house and standard of living but I don’t know if it would be feasible for the whole world to live like me and I’m not even rich or that well off. That’s the real crazy part. I have some privilege, I know I’m at least better off than half of my fellow Americans … But still I am just a proletariat like every other person working for wages.
Because bankers buy politicians and if people complain they buy news coverage to call the naysayers socialists
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.
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?
Many of these are hostile buyouts, which means they use their money to buy a majority of shares in the company and then overthrow the board. I don’t know if the Toys R Us sale was one of those though.
And they’re not saying it is fraudulent. Just that it should be fraudulent.
It’s not hard to use financial trickery to temporarily tank a stock price making it easier to buy up a company. When redditors went after gamestop shortsellers, the shortsellers used tricks to dip the stockprice just low enough just temporarily enough to trigger margin calls and crush the redditors.
It wasn’t fraud but it was poor business decisions based on their hope for massive growth instead of seeing success as steady profitability. They sold off assets (real estate) and then signed up to lease the property back from the new real estate owners. This shifted assets to liabilities. They idea would be to use cash to grow the business. They took too much cash as distributions to investors instead of making sound long term business decisions that would keep ToysRUs operating for the long term.
thank you for the explanation