Hacker News Reader

Comment by bko | Hacker News Reader

I don’t understand you’re hostility to what you call vulture capitals.

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?

View on HN

Depends on what "worth more" means. From a purely monetary standpoint liquidation that might be true. But giving VCs who are likely already rich more money vs. taking away peoples jobs isn't always the best way to "repurpose" money.

Presumably they do something with that wealth like invest it in a more profitable company or one with better prospects. If the company is unprofitable with their resources they’re destroying wealth which doesn’t serve the economy or society.

But the company was profitable before the VCs "restructured" it to basically steal (legally) everything they could. That's how the Vulture Capitalists work, there are other comments detailing this. Just because you can make money doesn't mean you should.

This narrative about vulture capitalists seems off. The CNN Money article first says:

> 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.

Is lining up pockets of third-parties a "more effective purpose"? Also, it seems to me that your computer could be used more effectively if it was a part of my scientific computing platform. Can I take it now?

You can buy it from me, which is what venture capitalists do. You can buy it from me and use it as collateral against a loan provided by a bank. I don’t see anything wrong with this.

That’s not a good comparison. What they’re doing is taking out loans against the business’ future value, buying it, stripping all of the assets and charging large mismanagement fees, and then letting it go bankrupt so other people pick up the costs. There’s not really a market where I could take a distributed computing loan against your computer, put the CPU into a different system, and default on the loan.

I honestly don’t see how this works, are you saying the banks are taking a massive loss on this venture? If so, wouldn’t the banks rationally avoid making loans to companies acquired by vultures, since they would always lose money to them? Who are the individuals taking a massive loss?

I’m asking basically why anyone would loan money to Toys R Us after it was acquired by corporate raiders.

The "lining of pockets" is deployed as investments in other companies. It isn't stuffed into a mattress. The richest people in our society live off an infinitesimally small amount of their wealth. The lion's share is deployed as investment (company stock, bonds, etc). It makes some sense to entrust this discretion over resources to people who have demonstrated an ability to manage resources at scale.

The people in question routinely bankrupt companies as a part of their method of operation. How is that possibly demonstrating an ability to manage resources at scale?

Reply on news.ycombinator.com