So, is taking it private a way to avoid scrutiny while they bleed the company dry? Or am I completely wrong?
Going private allows a company to focus less on shareholder value (its legal first obligation as a traded company save for a legally defendable company charter that counters this in any way, which is rarer than it should be). That theoretically allows it to focus on growth or market entrenchment before profits, and take risks otherwise you wouldn't be able to take without risks of lawsuits.
It allows more freedom in restructuring and financial business decisions. The downside to that is when a vulture capitals like Bain or Ichan comes along, their motives are to extract as much profit from the 'asset' as possible for themselves regardless of the outcome to the business.
It stands in start contrast to venture capital firms that actually care about success. its usually obvious which one 'investors' are. If they're willing to put up money and take risks with you at the start, they're venture. If they're coming along after you're successful but struggling with a 'grand plan' to restructure and improve your business if you accept their money (and hand over way more control than you should), they're vulture.
All of that is just my observations of course. I'm open to counter arguments.
This is widely claimed but there is no such requirement:
https://corpgov.law.harvard.edu/2012/06/26/the-shareholder-v...
The reason is obvious: it’s hard to predict over any non-trivial time in the future, so there’s a broad deference to business judgement. In the case of Toys-R-Us, for example, if they’d been a public company at the time that argument could simply be that lower returns to shareholders now was critical to the long-term health of the business. People who disagreed could sell their shares or attempt to find enough like minded shareholders to replace the leadership but nobody could say their view is unambiguously correct and so the law stays out of it.
If the assets of a company are worth more than the business as a going concern, shouldn’t the assets be liquidated or repurposed for more effective purposes?
I’m asking basically why anyone would loan money to Toys R Us after it was acquired by corporate raiders.
> Its debt was downgraded to junk bond status in January of 2005, at a time when Amazon's sales were just 4% of their current level.
And then it says:
> A year later the company was taken private by KKR, Bain Capital and real estate firm Vornado.
The fact that their bonds were downgraded to junk a year before tells me that Toys R Us was already in trouble by the time private equity stepped in.