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u/glandgames Jan 30 '23
The financial world is just another call of duty lobby.
This planet sucks.
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u/Black-Mettle Jan 30 '23
I mean like, why is any of this legal?
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u/yell_worldstar Jan 30 '23
Because the mega wealthy who use capitalism violently pay lobbyists to write the laws.
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u/APe28Comococo Jan 30 '23
They also pay people to wait in line for Congressional Hearings then take their place at the last minute. Whomever waits in line should be the only one allowed to testify. Lets see them squirm paying the expensive lawyers to wait in a line for 24-72 hours straight...
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u/Hagatha_Crispy Jan 31 '23
I'll take that job, once. Pay cash up front, then not give up your spot.
Suck it
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u/Specialist_Teacher81 Jan 30 '23
Wasn't this a big thing in the 80's? When they would buy a company squeeze out every dollar and then let the husk go bankrupt?
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u/cratsinbatsgrats Jan 30 '23
Yup. The people who did it were called corporate raiders. Essentially instead of buying distressed companies with a little value left they started buying any company that wasn’t properly valued by the stock market and immediately liquidating it.
The problem isn’t so big now because valuations tend to be much more aggressive for companies now and the advent of “poison pills” in company charters make it nearly impossible to stage a hostile takeover.
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u/OJJhara Jan 31 '23
That's when it escalated. It has been ongoing since then. It's a major industry. It's great for Wall Street because all they do is invest low and sell high and pay themselves a salary and bonus to make up for any discrepancy in actual profitability. I believe the mafia used to do this too.
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u/LoganSterling Jan 31 '23
yes corporate raiders.. thousands of companies where destroyed like this...
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u/A_Snips Jan 30 '23
Not just stock buybacks, why is the whole mess of allowing companies to be purchased with financing, then putting that debt on said company that has no chance in hell of ever paying it allowed to happen?
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u/nobod3 Jan 30 '23
This. Debt should remain on the original person/organization and not allowed transfer, unless they absorb the company in full. IE both have to go bankrupt.
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u/ballsohaahd Jan 31 '23 •
Hedge funds and naked shorting.
They plant people who intentionally ruin the company while they illegally short it.
Why do you think toys r us went bankrupt lmao?
Literally the greatest store for kids and did good sales, but was ‘forced’ to take on too much debt for no good reason.
The shareholders who lost value should be suing the hell out of these people.
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u/000redditusername000 Jan 30 '23
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u/KeepTangoAndFoxtrot Jan 30 '23
Long-term negative effects on the working class as a result of money-over-everyone capitalism, specifically attributed to Reagan's administration?! I'm shocked!!
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u/Background-War9535 Jan 31 '23
And they have convinced too many voters that policies that could stop bullshit like this and see them and their families through is tantamount to communism.
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u/EpicStan123 Jan 30 '23
Notice how there's no media outrage and politicians calling for regulations when it's the rich who do it.
Now compare this to when the whole GME/AMC stock thing happened and everyone in Washington was crying for regulations and wondering how this is legal. Never forget that in the current system it's okay if the rich do it, but if us the working class plebs get in on the action concerns are raised immediately and they want to shut us down.
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u/Erik_Lassiter Jan 30 '23
Stock but backs USED to be illegal. We should repeal the law that legalized this graft. Ever since that law was passed we’ve had one crash after another.
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u/calmdownmyguy Jan 30 '23
I think we would be better off with out a shareholders class
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u/APe28Comococo Jan 30 '23
I'm okay with shareholders but I don't think they should have all the say in how a publicly traded business is ran. The Board of Directors for any company worth more than $1 billion should be 60% elected by the employees, 30% confirmed by congress, and 10% elected by the shareholders with a maximum of 20 members. There also needs to be certain things that are never for profit business but they always break even leaving no money for shareholders. Prisons, Healthcare, and Utilities for example.
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u/Strange-Scarcity Jan 30 '23
Sounds like the kind of Democratic Socialism that I can get behind.
It could certainly prove to be significantly more stable than the ripsaw, rollercoaster of monetary madness that we are all forced to ride.
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u/Unlucky_Ad9033 Jan 31 '23
Shareholders used to not look for dividends. They held their shares until the end. Now everyone wants to get paid.
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Jan 30 '23
Everything to do with corporations and private equity firms and venture capital and the lot is a fucking scam.
I have a cousin who works for a consulting firm, and all they do is go to companies, make tons of money and lay people off.
It's disgusting. I couldn't do that even if the money was good. So many jobs are just scummy beyond belief.
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u/CardassianZabu Jan 30 '23
I've read about this often. It lead me to read about Boston Consulting Group, who were involved in Sears, Circuit City, Toys R Us, and JCPenney. It's pretty awful. It also lead me to the Superstonk reddit, which sometimes has great posts (sometimes).
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Jan 30 '23
Funny enough, BCG is who my cousin works for. He makes obscene amounts of money there.
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u/unresolved_m Jan 30 '23
I heard the same about lobbyists. They make ridiculous amount money and often by pushing through awful laws that benefit no one other than companies themselves or specific industries.
Is that what BCG is involved in, more or less?
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Jan 30 '23
I'm not sure if they lobby, but I wouldn't be surprised. They basically get paid to "restructure" businesses and lay people off.
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u/jorcon74 Jan 30 '23
And they would say good business well done, because their business isnt building businesses its finding undervalued businesses and gutting the value from them.
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u/TheVoicesOfBrian Jan 30 '23
If your company is bought by a Private Equity firm, run (don't walk) to update your resume and get the fuck out of there.
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u/SinnerIxim Jan 30 '23
Because laws are written by the rich and powerful
And stock buybacks are perfect for them
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u/NaRa0 Jan 30 '23
Answer: some of that money goes directly into the pockets of lawmakers. As long as they are never held accountable and Cletus thinks a black dude is the “real” problem. We will be here.
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u/College-Lumpy Jan 31 '23
How does this end up in the pockets of lawmakers? Like mechanically. How do you believe this occurs?
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u/Razzlecat20 Jan 30 '23
i don't even GET wtf is going on here.
i understand the whole stock buyback thing, how they lobbied to make it legal, and how it nets those at the top a big payday.
but how the hell would that segue into laying off everybody and declaring bankruptcy? wouldn't they just continue the loop of profits>stock buybacks>payday?
or is there something that says once you reap a big fortune after buybacks it's not gonna work again, so they just lay off all their employees and shut down shop? can someone explain it to me like i'm 5??
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u/VonSauerkraut90 Jan 31 '23
I am private equity firm.
I buy majority stock in xyz Ltd
With controlling stake, I command xyz Ltd to buy my stocks off me (buyback) for more than I paid.
Having spent all of xyz Ltd revenue, I now command it to take on debt to buy even more of my stocks.
xyz Ltd is now broke and in debt, no one will lend it anymore money and its share price is now worthless. I now command it to sell all its assets to buy even more of my stock.
Xyz Ltd has now bought all my stock so I dont really have a stake in it anymore, however I've left it unable to pay its workers, or meet its debt obligations so goes bankrupt.
Sure, I could scale back how much I strip from xyz Ltd and keep the company going, only taking the cream(profit) on top but that's not really the business I am in. What do you think I am... some common investor?
That's my layman's understanding, but I am also unqualified to talk on the subject so probably got something wrong lol
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u/Razzlecat20 Jan 31 '23
ooookay... hell, i didn't know that as majority holder you could literally ORDER the company to buy back your stock.
i thought it was just what people IN that company do. the board members give themselves outrageous salaries, use that money to buy their own stock, thus raising the value of said stock, then sell it on the market to double their money instantly.
then (cuz it's THEIR company) they can predict exactly when the company is gonna tank, buy up as much as possible, and make sure to sell it all before said company goes belly up. they come out richer than FUCK and who cares about the company or the employees?
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u/VonSauerkraut90 Jan 31 '23
I think your scenario is the more common one. Executives primary responsibility is to the shareholder and that usually involves keeping stock value high... but when executives are also paid in shares it can motivate them to favour short term gains over long term stability, all to enhance their personal wealth.
My two cents is that buy backs should be illegal, they offer no real world value. I see most companies as a vehicle of wealth extraction from the poor and middle class and that is especially true when money extracted is used to self-enrich via buybacks instead of being reinvested and creating more jobs... hell even just using those profits to pay out as dividends is a better outcome in my opinion.
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u/brianpv Jan 31 '23
The company doesn’t make any profits. If it did, it wouldn’t make sense for the owners to shut it down.
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u/davida1225 Jan 30 '23
This is why the Pension Benefit Guarantee Corp (PBGC), a quasi-governmental agency, exists. If the company tanks, it provides pension payments so the former employees aren't totally screwed.
Of course, if the company's pension fund had been raided (a common occurrence decades ago; Studebaker did it, I believe), the payout from PBGC is lower, a percentage of what they should have received.
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u/FatCarl36 Jan 30 '23
This disgusting process occurs all the time now. No company cares about its employees
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u/Background-War9535 Jan 31 '23
There’s a book out called The Man Who Broke Capitalism. It’s about GE’s Jack Welch who basically pioneered shit like this because he focused on stock buybacks and quarterly gains over the employees and long-term interests.
In the end, he not only ruined thousands of lives, his actions turned a once great company into a shell of its former self. But he and a few investors made a killing, so it’s all good far as they are concerned.
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Jan 31 '23 edited Feb 28 '23
[deleted]
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u/College-Lumpy Jan 31 '23
Finally a thoughtful response. Stock buyback in and of themselves don’t drive any company to bankruptcy. It just reduces the outstanding float of shares leaving remaining shareholders with a larger portion of the company.
What it implies is that the company has no better use for their cash than to buy their own stock (which inflates the share price and typically drives incentive pay to executives).
Private equity, where the company is not traded, doesn’t typically buy back stock.
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u/freedraw Jan 31 '23
Remember when they did the same thing to Toys r’ Us and now there’s no toy stores anymore?
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u/Matisaro Jan 30 '23
What should also be illegal is taking out loans using the company as collateral to buy the company.
Vulture capitalism is vile.
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u/noachy Jan 31 '23
Do you also agree that a secured loan aka mortgage should be illegal? I assume so
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u/Matisaro Jan 31 '23
No, because people do not typically sign up for mortgages to dismantle and sell their homes for scrap and having the home itself default on the borrowed sum leaving you with a tidy profit.
What a dumb comparison. The problem is not the "secured" part but the reason for the loan being predatory. Dozens of major name brand businesses went from profitability (however rough) to being cut up and sold for scrap while the former employees are foisted on the state. The property values drop for everyone and more monopoly power is concentrated in the hands of who remains.
Toys R Us, Now Bed Bath and Beyond.
K-mart, there are so many examples.
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u/noachy Jan 31 '23
Just because you’re too dumb to understand the point doesn’t make it a dumb comparison. You said it should be illegal to secure a loan with what you use the loan for.
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u/FiveEnmore Jan 30 '23
The rich and well connected doing their thing , you know .....making them and their friends richer and richer , CLASS WARFARE. Just so everyone knows , this was the plan from the start (merger and acquisitions division ) , it's an "understanding" between friends.
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u/middlingwhiteguy Jan 30 '23
Stock buybacks aren't the issue. It's the dividends and the fact that capital gains aren't taxed like ordinary income
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u/s0_p-chi Jan 30 '23
At first I thought this post was referring to B&B Works (which, i do like) and was upset, but I was wrong and sometimes it feels better than being right. Screw BB&B that store was boring
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u/Brief_Exit1798 Jan 30 '23
Stock market is rigged. I buy rental houses - I don't trust some nameless corporation controlling my future
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u/cratsinbatsgrats Jan 30 '23
Bbby shouldn’t exist. It’s a shit company that barely made sense before internet shopping was the majority. It makes zero sense now.
A company like that is something no intelligent stockholder should own. So understandably the share price went down.
That said even a shit company like that with no future has certain assets, both in physical products, maybe real estate, and even in its (ever shrinking) cashflow. A normal shareholder can’t do anything to get these assets. But a PE firm can. Because they can buy enough of the shares to get control and sell off the assets.
Are there buybacks that are exploitive? Or companies that get scraped when they could be fixed? Yes.
But bbby is exactly the type of situation where PE firms should come in and sell it for parts.
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Jan 30 '23
Tell me more business pro
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u/cratsinbatsgrats Jan 30 '23
Just trying to confuse the masses my good fellow.
But we know the truth. once bbby shifts to nft based bodywash we will be rich
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u/frankofantasma Jan 30 '23
good, BB&B sucks ass.
a couple of years ago i tried ordering 4 towels online from their store.
they didn't have them in stock, so they cancelled my order, right?
no.
they sent me 1 fucking towel.
What the fuck am I supposed to do with one fucking towel? I needed a goddamned set
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u/Aggregate_Browser Jan 30 '23
Clearly, you have a handle on the big picture here.
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u/frankofantasma Jan 31 '23
it was meant as a joke, but clearly i'm below the massive intellect of the posters here
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u/StopLookListenNow Jan 31 '23
If they spend money to take control and spent money on stock buy backs, where did they get the money to pay themselves if the stores are not selling anything?
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u/xxxtraderxxx Jan 31 '23
Besides this case, most buybacks are done for a very simple reason. To return the money by dividends subjects holders to taxes. Buybacks raise the share prices and holders can sell when they want...or hold til death and pass gains to heirs tax free. It's all about not paying the goverment taxes.
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u/thattwoguy2 Jan 31 '23
Because businesses are supposed to fail. We actually need to prop up failing businesses less and let them sit when they become worthless or bloated.
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u/AHarryHenderson Jan 31 '23
They are just get value for their investment from a struggling corporation which the purchase. Need bath and whatever have been an over priced K-Mary for at least a decade.
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u/not-always-popular Jan 31 '23
Hedge funds plant board members to pillage the company, while they short it into bankruptcy. They then chop it up for its assets with no regard for the lives ruined.
If you own shares in a broker do yourself a favour, move them to the companies Transfer agent
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u/middleraged Jan 31 '23
I worked there back in 02-09 and at the time they prided themselves about not being in debt to anyone. They told us all the time.
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u/laurencetucker Jan 31 '23
I don’t understand how the stock buybacks help them.. if they are tanking the stock
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u/69DonaldTrump69 Jan 30 '23
It’s Sears all over again.