Vulture Capatialism Affects Delphi And Cabelas...

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  • Ingomike

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    Some of you may know more of if this is correct or how bad it was...

    [h=1]FNC's Carlson Rips 'Vicious' Billionaire Paul Singer for 'Vulture Capitalism' Tactics[/h]During his Tuesday broadcast of Fox News Channel’s “Tucker Carlson Tonight,” host Tucker Carlson took a highly critical look at billionaire hedge fund manager and political financier Paul Singer’s practices, which have made him a wealthy man.


    Carlson reminded viewers of the circumstances throughout the country in an age where the industrial sector thrived but now barely resembles that era.


    What has led to that, according to the Fox News host, is, in part, Singer’s practice of purchasing distressed companies, remaking them in a way that includes outsourcing the labor and selling them at a profit but at the expense of a company’s original employees.


    “[T]he model is ruthless economic efficiency: Buy a distressed company, outsource the jobs, liquidate the valuable assets, fire middle management, and once the smoke has cleared, dump what remains to the highest bidder, often in Asia,” Carlson explained. “It has happened around the country. It has made a small number of people phenomenally rich. One of them is a New York-based hedge fund manager called Paul Singer, who, according to Forbes, has amassed a personal fortune of more than $3 billion.”


    Carlson offered automotive parts supplier Delphi as an example.
    “During the last financial crisis, a consortium of hedge funds, including Singer’s Elliott Management, purchased Delphi,” he said. “With Singer and the other funds at the helm, the company took billions of dollars in government bailouts. Obama’s auto-czar compared the tactics to extortion. Once they had the bailout money, the funds moved most of Delphi’s jobs overseas, and then either cut retiree pensions entirely or shifted the costs to taxpayers.”


    “With lighter financial commitments at home and cheap factories abroad, Delphi’s stock soared,” he continued. “According to investigative reporter Greg Palast, of the 29 Delphi plants in operation when the hedge funds started buying Delphi debt, only four were still operating in the United States by 2012. Tens of thousands of unionized and white-collar workers lost their jobs. Paul Singer’s hedge fund cashed out for more than a billion dollars.”


    Another example that Carlson highlighted was Singer’s involvement with outdoors retailer Cabela’s and how Singer’s practices decimated the town of Sidney, NE.


    “In October 2015, Singer’s hedge fund disclosed an 11% stake in Cabela’s and set about pushing the board to sell the company,” he said. “Cabela’s management, fearing a long and costly fight with Singer, announced it would look for a buyer. At the time, Cabela’s was healthy. The company was posting nearly $2 billion a year in gross profits, off $4 billion in revenue. There was no immediate need to sell. But they did anyway.

    One year after Singer entered the equation, Bass Pro Shops announced the purchase of Cabela’s. The company’s stock price surged. Within a week, Singer cashed out. He’d bought the stock for $38 a share. He sold it for $63. His hedge fund made at least $90 million upfront, and likely more over time.”


    But in Sidney, Nebraska, it was a very different story,” Carlson continued. “The residents of Sidney didn’t get rich. Just the opposite. Their community was destroyed. The town lost nearly 2,000 jobs. A heartbreakingly familiar cascade began: people left, property values collapsed, and then people couldn’t leave. They were trapped there.

    One of the last thriving small towns in America went under. We recently sent two producers to Sidney, to survey the wreckage and consider what happened. Our producers talked to more than a dozen former Cabela’s employees. Almost all of them refused to speak on camera, fearful of legal retribution from the famously vicious Paul Singer.”

    https://www.breitbart.com/the-media...e-paul-singer-for-vulture-capitalism-tactics/
     

    Ingomike

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    So.. buy low and sell high? Good thing or bad thing?

    Not a thing wrong with that. Market manipulation is an issue to me, there is a difference.

    If three people own a company and need money so 15% is sold to another party to help cash flow. The 15% owner creates an issue with suppliers or customers to force the others to sell. Probably to simple, but is that capitalism or market manipulation?
     

    Leadeye

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    Buy low > pass off expenses to taxpayers > sell high.

    This works when you can get friends in government involved, bailout money and pushing pensions on to PBGC, I would imagine that there were government players or their law/lobby go between guys that cashed in as well to make this work. I've watched companies die over the years from poor management, getting to the point where sharp well heeled operators can do what this guy does. Part of the trick is working to keep from getting in that position and having some top brass with a spine.
     

    ATOMonkey

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    I don't see anything illegal or unethical about cashing out a failing business. Especially if someone is dumb enough to buy it after you've gutted it.
     

    Ingomike

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    Market manipulation is an issue to me, there is a difference.

    If three people own a company and need money so 15% is sold to another party to help cash flow. The 15% owner creates an issue with suppliers or customers to force the others to sell. Probably to simple, but is that capitalism or market manipulation?

    I don't see anything illegal or unethical about cashing out a failing business. Especially if someone is dumb enough to buy it after you've gutted it.

    So you support market and finance manipulation because it is part of unbridled capitalism?
     

    HoughMade

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    The only problem I see here is the gvt. bailout and it's lack of terms. The solution is either don't have bailouts or if you are going to persist down the bailout road, there have to be terms that prevent bailout money from, indirectly, funding outsourcing.

    Personally, I prefer the less-government option.

    As far as the concept of "vulture capitalism"....why do we hate freedom? Get the government out and if it still happens, well, that's tough and all, but business cycles gonna cycle.

    I suppose the government could step in and tell every company what it can and can't do on every decision...
     
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    ATOMonkey

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    So you support market and finance manipulation because it is part of unbridled capitalism?

    It's not manipulation. Everything is fully disclosed.

    The only reason this can happen is because these companies are already failing or have failed. Vulture is a very apt term, because someone can swoop in and take what's useful off the carcass that someone else killed.

    Delphi died because upper management mortgaged the future for temporary bonuses and then took off. Cabela's died because they priced everything 150% too high for some damn reason.

    In both cases the companies were drowning in read ink and were borrowing money to make payroll. All those jobs would have been lost regardless.

    Now, if you want to make a case that governments shouldn't interfere with capitalism, I won't get in the way of that.
     

    BugI02

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    I don't see anything illegal or unethical about cashing out a failing business. Especially if someone is dumb enough to buy it after you've gutted it.

    The best example within this realm I recall was Northwest Airlines. It was a moderately profitable (as are all airlines) company that paid good wages and owned outright much of its own equipment, as well as assets that couild not be duplicated such as maintenance hangars and infrastructure at places like Narita, Seoul and Schiphol

    A small group of individuals, led by a man named Checchi and backed by 'vulture' money, got control of the board and took the company private in a $3.7billion levereged buyout. Checchi had around $15million skin in the game but wound up co-chairman. Because the company now had massive debt owed to the people from whom money was borrowed to buy that controlling interest, they set about leveraging everything. They sold off the valuable real assets and even sold the aircraft the company owned to a leasing agency and then leased them back. Then they used the financial conditions they had created to extort ~$800million in employee compensation give-backs and another ~$850million in assistance/investment from communities such as Detroit and Minnesota where NW was a large employer. They pared employment and route structure, shrinking the company to about 60% of its former market reach, and made it profitable (although not as profitable as it had been before it was put in play). Once it was profitable, they went public again and the principals pocketed several billion dollars. Checchi himself made an estimated $700million on the stock he issued himself (remember, for a $15million investment). Checchi eventually tried and failed to buy the Governorship of California in 1998 with record spending (for that time), losing to Grey Davis in the primary. The employees and the airline never recovered, staggering along until the mid 2000s when NW filed for bankruptcy and was enventually bought by and merged with Delta.

    Nothing illegal about what they did, but maybe it should be. Maybe vulture capitalists should be required to exercize fiduciary responsibility when dismembering prey that isn't dead yet
     

    ChristianPatriot

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    Capitalism, like a lot of other things, has no inherent morality. Capitalism is good at creating capital. Obviously. The charitable/ethical part of an economy rests in the people, not the economic model.
     

    rosejm

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    Corporate raider buys controlling interest in company
    Runs it into the ground either accidentally or on purpose

    Sounds like most people I know with more money than sense.


    Everything has a price and the previous owners decided cash in hand was worth more than their employees & future profits.
     

    HoughMade

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    Corporate raider buys controlling interest in company
    Runs it into the ground either accidentally or on purpose

    Sounds like most people I know with more money than sense.

    Everything has a price and the previous owners decided cash in hand was worth more than their employees & future profits.

    Right, wrong, whatever.

    My Dad always told me to have a widely marketable skill that I could take with me anyplace. That way if my employer went under or laid me off, I can take the skill and go elsewhere. My Dad plied his engineering skills at a place that made surface to air missiles, then when the government stopped buying the missiles his company made (Talos), he went to work for a place that made medical devices and made some pretty important ones.

    If all you can do is the hyper-specific, unskilled thing your employer taught you to do and you have no widely marketable skill....you are dependent upon the employer. My father-in-law, a wonderful hard-working man, worked 43 years (for the same company my Dad did) packing boxes with products and loading them on trucks. He was in the union and because of his years, made decent money. That worked for him from the '50s to the '90s. After he retired, the company moved everything out of the state. What if they had done that when he had 20 years in? You start over at the bottom. We can lament that the world isn't as it once was, or prepare ourselves for the possibility of change.

    In other words, I urge people to spend less time complaining about what happens in board rooms and more time preparing themselves to be flexible and marketable.
     

    Ingomike

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    Corporate raider buys controlling interest in company
    Runs it into the ground either accidentally or on purpose

    Sounds like most people I know with more money than sense.


    Everything has a price and the previous owners decided cash in hand was worth more than their employees & future profits.

    These are publicly traded companies being decimated by raiders not irresponsible buyers or owners.
     

    BugI02

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    Someone took the company public and willingly ceded control of it to the stockholders, whoever they may be.

    I suspect that even stockholders would prefer a company they are invested in be bought by a Buffett than an Icahn. Were it me, the former event would encourage me to stay invested; the latter to take my gains and exit
     

    HoughMade

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    I suspect that even stockholders would prefer a company they are invested in be bought by a Buffett than an Icahn. Were it me, the former event would encourage me to stay invested; the latter to take my gains and exit

    That may well be the case, but unless the stockholder own enough or can put together a large enough voting block to stop "vulturism"....well, it's going to happen. Being a minority owner has consequences.
     

    rosejm

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    I suspect that even stockholders would prefer a company they are invested in be bought by a Buffett than an Icahn. Were it me, the former event would encourage me to stay invested; the latter to take my gains and exit
    Being a minority owner has consequences.

    And enough of those minority owners decided that they would also take their gains and exit.



    Funny how the tables turn when the folks voting with their wallets are no longer supporting the things we support.


    In other words, I urge people to spend less time complaining about what happens in board rooms and more time preparing themselves to be flexible and marketable.

    You must spread some Reputation around before giving it to HoughMade again.
    And I haven't even repped you in this thread yet...
     
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