Big Ten Private Equity Proposal
- Thread starter Willow Grove Dawg
- Start date
So you are afraid my IQ is higher than yours?
I’m assuming you love DJTs strategic moves!!
I mean cutting fat and some jobs is better than cutting them all isn’t it?
Bc that’s what happens when businesses are ran crappy. People lose jobs.
Yeah. I wouldn't worry too much about the SEC. I think they'll be OK.
Not when it’s at the expense of the companies that they purchase. Great, the Private Equity firm employs more people, but that generally comes with reduced workforces and benefits for the people working in those companies. I don’t give a warm sнit how well Blackstone does. I want Mississippi State to do well, and I don’t want some jackass from New York saying “sorry, we’re just not seeing the per-event revenue we want to see from baseball. It’s time to reduce your scholarship roster count.”
Also, people got turned off from making athletics department donations over NIL and Revenue Sharing… just wait until they get a hint that some jаckoff VC is benefitting from their donations.
Yes, I understand that. But does it make sense to let them get in on it now? Big 10 has already set up billion dollar plus TV contracts (annually) without whatever expertise PE might add. Is the extra one-time $2B worth whatever incremental value they claim to create over the long term + having to deal with an outsider that's probably not in it to "lift all ships"?
I mean give me a specific scenario where a VC or PE bought a company and you didn’t like the outcome
my middle name is John so yes I love my strategic moves.
i could care less about how well you score on a test i took when i was six to be in accelerated learning classes while you got to go to the class that teaches you which crayon tastes the best.
Just to clarify if any of you smartless, non-geniuses out there were confused by the capitalization - that's Elo Score, named after chess master Arpad Elo. Not a reference to Electric Light Orchestra.
You certainly don't have the political leanings of someone who was in accelerated learning classes. But you may have been going to one of those woke schools who accelerate kids to help them with their self esteem.
Toys R’ Us - a group of private equity investors purchased the company, then dropped the very debt it incurred to purchase the company directly onto Toys R’ Us’s books, then bled the company dry over the course of a decade until it was forced to file bankruptcy. Vornado, KKR, and Bain made out really well. Toys R’ Us… not so much.
That’s not an outlier. Private Equity owned companies go bankrupt at a disproportionately higher rate than other companies and they tend to follow that same pattern of loading the target company with debt, sucking its profits dry until its cash reserves are depleted, then forcing the company into bankruptcy while they walk away scott free.
I saw someone compare private equity to a “home flipper” and I think it’s a pretty apt analogy. PE’s aren’t “home owners”. They have no attachment or interest in seeing the company they control have sustained life or ever truly being “home”. Their only interest is a speedy return on their investment. Maybe I’m glib or pollyannaish or overly idealistic, but I mean… I love Mississippi State. Mississippi State is my home and I want it to succeed far beyond my time on this Earth. I don’t think private equity investment has a congruent end goal.
But please, with your advanced IQ, explain to me how private equity investment ends up being a good thing for Mississippi State and give me an example where private equity ownership ended up being a good thing for the targeted company.
So if I created toys R us or any other company, do you have something against me selling the company I created to anyone I wanted?
Ok, you miss the whole point (I assume you can’t name a company where private equity actually improved that company either.) It’s not about what somebody has the right to do with a company they started. That’s fine though, I’ll address your completely unrelated question.
The answer is “it depends on my relationship with your company”.
If I’m your customer and selling the company meant the prices I pay are going to go up or the company is going to discontinue a good or service I use, then yes, I would be against that.
If I’m your supplier and selling the company means your company is going to try to pay me less for goods and services or cancel some contract we have, then yes, I would be against that.
If I’m your employee and you selling the company means I will lose my job, be forced to relocate, or take a pay cut, then yes, I would be against that.
If I’m an investor in your company and my share of the company is diluted or loses value because of you selling the company, then yes, I would be against that.
If I’m the mayor of the town where your company is headquartered and you selling the company means the HQ will be shuttered or moved to another city, then yes, I would be against that.
There are a ton of reasons for a person to be against somebody else selling a business, even if the company’s ownership has a right to do so.
Again, that’s not remotely near the point. You still can’t explain why PE would be good for Mississippi State.
How much less could you care?
Not disputing the PE stuff because we all know that happened and will continue to happen....it's the devil you know. Toys R Us was doomed anyway.
The business model of Toys R Us was outdated and they never adjusted. Walmart, Target and Amazon ate their lunch. They never adjusted to online retail or innovated with new offerings.
Contrast that with Best Buy. Best Buy was fast following Circuit City to the retail graveyard but they adjusted, innovated, added more services, promoted online purchasing, and leveraged their brick and mortar locations. It's still an uphill battle for them but they are surviving and will continue to do so as long as they adjust and innovate.
This is all accurate. But the more I think about it, your post kinda made a couple of things register for me for what this is REALLY about, based on simple math.
First off, the B1G is not Toys R Us. It’s currently the most profitable non-professional sports league in the world. It’s not going to fail. Secondly, a 5% stake by an “outside investor” is not going to be anywhere close to the controlling interest that PE firms had in Toys R Us. So, the ultimate question then becomes, for the PE firm, why do this? What’s in it for them?
Lets look at the numbers. A really, really modest or perhaps even low end return for a VC investment would be something like 9.5% over 10 years. That would result in $5 billion in revenue after 10 years just for the PE firm, and each B1G member institution, if the 1/20th stake is to be taken at face value. What does that look like? Well, the VC firm, and each school, would be getting $500,000,000 per year on average. LOL. Not even close to happening. That value isn’t there. The B1G has the highest projected payouts per school of any league, and that number is still only projected to be $75 million per school in 2025. The VC firm would literally have to generate a 667% increase in revenue on a per-school basis almost overnight to support that investment. Not possible.
Now lets look at another more plausible scenario. The $2 billion seed money is evenly distributed. Result is about $105 million per school gets doled out initially. VC firm demands that it gets recouped this initial investment as part of future revenue share payouts. So they get a cut of a little over $190 million per year that would otherwise get distributed to the schools and league. But the schools and league aren’t allowing this without increase to their bottom line to make the juice worth the squeeze. So they are still getting their $75 million. And PE then has to get about $3 billion to get back on average beyond that to make their 9.5%, lets call it $300 million per year. Lets say the schools agree to allow a 3/1 return rate for the VC firm vs their own payout, a ridiculous concession for them, but lets play it out. Schools and the league are then getting $175 million per year each. PE gets $300 million per year as standard payout, plus the $190 million per year total as recouped investment. $490 million per year total for the PE for first 10 years.
Add it all up, annual revenue for the schools, league office, and revenue has to be around $3.8 BILLION per year in order for the investment to make sense for PE. Expected 2025 revenue for the league is $1.2 billlion. So, now we’re down to PE “only” having to triple the revenue overnight….sure. Again, not happening. All the Nascar patches and Roger Dorn outfield walls on planet earth aren’t going to pull in $2.6 billion per year. Its a pipe dream.
So, its now well established that there is literally no viable investment here by PE that will pass the smell test and be approved by the schools. So, what’s it really about, then?
Hmmm…..
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i could have not even responded to him. but i did care enough to go for a dig. so i couldn't say i couldn't care less there. much to drebin's dismay.
I guess grade school and Mississippi State is just woke now.
Glad we can all come together and support woke on this board, hail state!
I haven’t stated or implied PE was good or bad for Mississippi state.
You’ve stated PE was bad in general.
So if I create a company and sell it to private equity so what? They offered something I liked and I took it. Good for me and them. That’s my right to sell something that belongs to me.
Now that they bought it it’s their right to do with it as they please assuming they aren’t breaking any laws.
If they wanna buy and shut it down? So what. You might think it’s stupid but they get to do whatever they F they want with it as they should.
Now to your point about toys R us. I’m willing to bet toys R us was happy as **** a company saved them financially. Not like brick and mortar businesses were going out of style or anything.
the company probably acquired contracts from toys r us. And if toys r us has a viable market the jobs lost were likely created somewhere else.
I wouldn’t call getting financially saved the devil!
but your second sentence is about the only thing that matters in this entire TOYS R US argument.
That's not really what I'm describing. I'm against running bloated companies that allow non-performers to suck the air out of the room and persist. Most of the PE takeovers I have seen involved market consolidation (reducing competition) and the reasons that ownership sells vary, but all come down to that being the most profitable way for them to exit. The result is most often installation of leadership that doesn't know a thing about what made the company worth purchasing in the first place and boneheaded decisions that result in degradation of the purchased company ensues. Bad for even good employees, bad for customers and ultimately bad for all of us. I'm sure there are a few "turn around artist" type VC/PE firms that make bad companies good, but they are atypical in my experience.
ETA: There is also a similar experience when a company buys another and nothing is going to change...until it does. I've seen countless regular(non-PE) corporate acquisitions follow the same path as the PE ones. However, the difference between a company run by founder who had some vision for creating something worthwhile and a company run by a bean counter who has over promised investors is night and day.
I don’t like monopolies either but let’s go back to some regulation and insurance companies.
I see it on here all the time. Insurance companies are big bad wolves who make huge profit margins and take advantage of people (huge profit losses is a gross inaccuracy).
Well if the above is true (it’s not), it would be really easy for someone to come in and offer insurance alternatives that were cheaper and more transparent and still guarantee a solid return.
SO EITHER 1 OF 2 THINGS IS TRUE
1. Insurance companies aren’t making unfair margins
OR
2. Barriers to entry exist that make it not worth it. Aka regulations
so which is it?
I'm unable to follow the path from the PE topic to insurance and I'm certainly not an expert on insurance margins.
You brought up unfair pricing when companies buy out the competition
I’m saying barriers to entry into a market make competition hard. I’m using insurance as an example.
Let’s take grocery stores for example. We could come up with lots of examples.
There is a large group of dumb @$$ people who think grocery stores are just raking in tons of money to the bottom line of sales.
If that’s true, go open a grocery store in any town where you think prices are crazy high due to unfair pricing. It wouldn’t take that much money to do it.
But the simple fact is, price gouging isn’t happening in grocery stores at some significant scale.
does price gouging happen in industries? Sure but in most of those entries there is either a lot of regulation things that make it hard to get into the market or it cost a lot to get into the market and investors rightly want to make their money back.
I don't recall bringing up unfair pricing, perhaps another OP did. I certainly think that arguing about unfair pricing is a fools errand, unless we agree on what "unfair" means to begin with. In a free(pseudo free) market, pricing ideally will be dictated by consumer's willingness to pay.
Citing one of your previous post topics, insurance for example, ideally, we would say if want insurance buy it and if you don't, cover your own medical. Healthcare would be free market and prices would be reasonable based on healthcare providers trying to get patients to get care from them. The insurance process interrupts that completely. We mostly get insurance from our employer (limited choice - not free market). We get expensive treatment from places that our insurer tells us they will cover through pre-negotiation. While we technically have the ability to decide not to get treatment where they tell us, practically speaking, most of us are not in a position to have a choice and actually afford to pay what it costs to treat.
We can compare the US to the rest of the world and the numbers tell the story on our costs vs other developed nations. The genesis of insurers wielding outsized influence in our country goes back to a well intentioned beginning when competition for labor during WWII saw companies add healthcare insurance as a benefit to attract workers. In hindsight, this was a big mistake.
My out of the box idea for healthcare involves some hand waving to unwind some of the current system and then let healthcare insurance become like auto insurance. Manage risk through data. You eat crap, don't exercise and cost the insurance company way too much money because of your choices, you pay higher premiums or get dropped. The level of invasiveness it would take for insurance to know all that is likely untenable. That also removes the human element. What do you do with a bunch of sick people that are just spiraling? Dedicate a state to host all the unhealthy people and let them figure out how to best handle it?
Complex problems defy easy answers, so if you want to know if are "right" about something, I can't help you much, but if you want some certainty that you are wrong, oversimplify a complex problem and submit a trite answer for that problem.
Figure of speech could easily have said the person you know. I'm not calling anybody or group the devil.
You talked about reducing competition and i assumed that had something to do with pricing. I guess i was wrong on that assumption.
Every single complex problem is solved through breaking down the problem into simpler solutions (advanced math, physics, LIFE, etc.).