This point about "private equity" being a boogeyman is such a tired take, the vast majority of equity of companies are held privately, and the vulture PE firms do exist but are not as prevalent as people make it seem online. It's a meme that many people seem to have latched on when the vast majority of PE firms and companies work perfectly fine, buying a company, growing it, then selling it for a profit.
Aside, why not link the original video instead of a reddit post?
the vast majority of equity of companies are held privately
vulture PE firms do exist but are not as prevalent as people make it seem online. It's a meme that many people seem to have latched on when the vast majority of PE firms and companies work perfectly fine
If you're seeing it in the media, of course it's confirmation bias. Do you think it makes a good headline to say that a firm bought a company, grew it over 5 years, then sold it? Yet that's what happens in the majority of cases. Those in the media are the exceptions that prove the rule.
It's a huge mistake to narrow down the problems of private equity firms (PEFs) to the dissolution of the companies they buy.
> Do you think it makes a good headline to say that a firm bought a company, grew it over 5 years, then sold it?
How is that different from what the video said? They buy all the hardware, grow the price of it by the mere fact of buying it up, hoard it, and then they sell it back to you at even higher prices as cloud services.
They make a profit but you are robbed. It's the strategy of scalping which has been going on in the GPU market for quite some time, but now it's used by corporations on an industrial scale.
The problem is precisely in the normal operation of PEFs, or rather, in the regulations that allow them to operate that way.
I'm not sure I ever said this, certainly there are some problems attributable to their companies but not all.
> but now it's used by corporations on an industrial scale.
You mean, buying raw goods? It's not "scalping" if a company is buying what they need to integrate into their finished goods. That is to say, they are not buying them with the express purpose of reselling those same items back to you, as is, which is the case with actual scalpers of concert tickets or GPUs for example (and which is the actual definition of scalping, no economist would call this scalping). That's like saying I'm being "scalped" when a construction company buys timber to build into a house. Oh no, I'm being "robbed" of being able to buy my own wood, and the company is increasing the price of the wood by mere fact of buying it up, and then because the house costs more than what I would've paid for the wood.
No, it's not same as anyone, the AI and datacenter companies have long term supply agreements at lower prices, essentially front-running the retail market. These agreements redistrict the volume available for retail and we end up scalped.
At every step the corporate purchases happen at lower price points, like this:
Price at 10 ->
corporate, high volume, buys at 10, hoarding of hardware ->
price up, retail buys at 20 due to a starved retail space ->
corporate, high volume, buys at 20, more hoarding ->
price up, retail buys at 30 due to a starved retail space ->
... etc.
https://finance.yahoo.com/news/now-more-pe-funds-mcdonald-12...
So while PE firms are not inherently “vulture” like, I would argue that the increasing number of firms fighting over the same number of assets to squeeze out returns (hopefully) above market returns leads to behavior that can be considered “vulture” like. For context, part of my work is to sell assets to PE firms
I'd actually be very interested to see if anyone ever managed to break down who actually owns what
I think PE just become a very popular way for wall street grads and MBA types to make a decent living without necessarily having to be a good investor (PE funds don’t present their full returns until 10+ after the fund has closed).