Comment by thrance
2 years ago
I have no problem with unprofitable, severly mismanaged companies going out of business. I do have a problem when a company is liquidated to give an exit to shareholders when it is still profitable, as described in the article.
Honestly curious why? It seems a perfectly legitimate and even successful end to a company.
It seems to me that some people simply don't like change for sentimental reasons. There is no shortage of restaurants, and most frankly seem better.
If a company provides some utility while still making a profit, wouldn't it be morally better to let it be?
Killing the company immediately hurts its employees, its customers and reduces the income available to the collectivity through taxation. It even also hurts its stakeholders in the long term, who could have earned a steady dividend for many years to come.
I don't care much about Red Lobster and other chain restaurants, as I'm not even american. I simply believe we should coerce markets into optimizing for utility instead of short-term profit, which is their natural behavior.
When a company is liquidated, its value and assets go elsewhere and are put to more productive use. This value difference is how liquidation is profitable.
This means more taxes for the government. Owners get paid out when PE buys a company, usually with a premium so they are happy.
PE liquidation IS utility optimization. The only way it makes profit is if the money made is invested into something with higher returns than the company had.
Killing a company is bad for employees that have to find new jobs, but permanent jobs are extremely toxic economically. If we avoided corporate churn for the sake of employee transitions, we would all be wearing textiles woven by luddites, and riding around in horse carts.
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