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this post was submitted on 29 Sep 2025
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below is a reply to a comment I made below, pasting here as I find it crazy how this went down and is allowed.
For those curious I did a little digging. I’m on mobile so won’t be going in and out to add company names etc.
Basically, the private equity firms got together and said let’s buy Toy R Us for $6.6B but we only want to use say 300M of our own money and get a loan for the rest.
Then they bought Toys R Us but made them sell all assets to equity firms which then leased them back to Toys R Us so they could pay back the loans. This means Toys R Us are paying hundreds of million a year to cover loans and can’t put that money into making a better business.
The private equity firms also made Toys R Us issue dividends in the hundreds of millions so private equity can make money.
In the end private equity walked away with over $1B in profit whilst Toys R Us declared bankruptcy with $5B still left to pay.
What a fucking insane system. Like how many people lost their jobs so these ghouls could make some extra cash off its downfall.
And people think I’m crazy for making my life harder by not shopping at places like Amazon or being a pirate and not giving money to Netflix etc.
I feel I am living in crazy land. Like the Uk has all our pensions and shit tied to the damn stock market, ensuring we can never really leave this system.
You're not crazy; you're smart.
The average person just doesn't want to accept how stupid they are.
The hypersane smart get called crazy by conformists.
Sweet jesus. How is this not some kind of hyper mega ultra fraud?
Because bankers buy politicians and if people complain they buy news coverage to call the naysayers socialists
I have no idea and it seems insane to me.
I was looking for the same thing in my country, UK, thinking we can’t be as bad as America, but nope many of the companies that have died during my life have been due to LBOs. The world is insane and I don’t see how we can change it.
In the UK I learnt that Asda one of our largest supermarkets is in a similar place due to two brothers doing an LBO to buy it. Now it’s saddled with debt meaning it won’t be able to innovate like Tesco or Sainsbury’s and thus will likely just bleed customers. Makes me wonder why these two brothers with more money than God would want to carry on, like I literally can’t comprehend wanting more than you need. Perhaps I have different motivations as I see time as my most precious asset and will earn less money than I could just for the easier life of being able to chill more and do the things I like.
the primary shareholders of a company can usually do whatever they please (as they should in the case of some proprietorship) as such can sell whatever assets for whatever price.
I'm kind of financially illiterate
what part of the firm's actions were fraudulent? if they make an offer and toys r us accepts, there's nothing predatory going on is there?
It's not hard to use financial trickery to temporarily tank a stock price making it easier to buy up a company. When redditors went after gamestop shortsellers, the shortsellers used tricks to dip the stockprice just low enough just temporarily enough to trigger margin calls and crush the redditors.
Many of these are hostile buyouts, which means they use their money to buy a majority of shares in the company and then overthrow the board. I don’t know if the Toys R Us sale was one of those though.
And they’re not saying it is fraudulent. Just that it should be fraudulent.
It wasn't fraud but it was poor business decisions based on their hope for massive growth instead of seeing success as steady profitability. They sold off assets (real estate) and then signed up to lease the property back from the new real estate owners. This shifted assets to liabilities. They idea would be to use cash to grow the business. They took too much cash as distributions to investors instead of making sound long term business decisions that would keep ToysRUs operating for the long term.
thank you for the explanation
In a sane world that would be life in prison illegal.
Sadly we live in crazy town.
Wait until you hear about using shorts to drive a company out of business or stock buy backs.
What I don't understand about the whole thing is who ends up holding the bag of all that debt?
Like banks that lend them billions must be intelligent enough to know how private equity takeovers like this work. So if they lend them money, they surely would want to get that off their books asap. But who do they sell it to? I can't imagine there is any type of reinsurance for this, since insurance providers should know even better.
I imagine some of the debt is to employees and small contractors, but can that really account for such a massive sum?
So the Equity Holders (The Private Equity firms) were largely shielded from risk as they had taken out billions in dividends and they had a small equity state relative to the debt meaning their downside was limited.
The creditors (large banks) were left holding the bag, but they’d had years of interest payments so they wrote off the rest and likely still made some profit.
Employees, suppliers, and landlords. Employees lose their jobs, suppliers get pennies on the dollar for what they’re owed and landlords might have got some money but still not all.
So in short it was the banks, but don’t forget they had years of interest payments and after all they took the risk.
Well, I mean, banks kind of 'invent' the money which they hand out as loans...so what do they care, really?
When the pile of bad loans gets to big, they sell those bundled as loot boxes to other banks. When that pile starts stinking too much, they are too big to fail and get bailed out. That's the circle of life 🪇🎶
Welcome to the house of cards that is globalisation and capitalism.
This is assuming that the landlords aren't also the private equity companies as well. So far as I can tell in long term care/assisted living/skilled nursing facilities, the same parent company owns everything, but the food branch is separate from the nursing branch, is separate from the physical rehabilitation branch, is separate from the admin services, and since they are all separate from the building branch, they are all operating "at a loss since" they have employees to pay. All the money goes to the building branches and everyone else gets told to do more with less.
The banks can also technically short the stock as well once the buyout was public, knowing how shit the deal was they can make money on the downside at the expense of all the pensions, 401ks etc that had initially bought the stock. There also isnt a limit that prevents shorting the stock more than shares are in existence. Hence why the gamestop situation was close to breaking the whole stock market a few years back when they started turning everything around for the companies bottom line. With the stock now able to make it think a bout a billion more shares over time the out for the short side has been sort of given without completely nuking the market. But as when the shares are diluted is up to the board it allows gamestop to take advantage of the short side to create more cash on hand for themselves threw timing their market offerings to coincide with when swaps that are housing those shorts come due. In the toys r us case the executives and board were happy to take their golden parachute from the buyout and let ordinary people's pensions and 401ks carry the bag for them in the form of the stock going to zero and eventually being delisted from the market.
Not sure this applies here as it was a private buyout meaning that there would be no stock to short.
They could have shorted it before the buyout to get a better deal, but the banks didn’t buy it the just lent the money.
Also shorting before could be seen as insider trading, right? Not that something being illegal means it wouldn't happen, but feels like that would be hard to hide.
So we make interest illegal and the whole scam falls apart, got it.
and if you do that most of the economy fails because no one wants a bond that does nothing
The current economy sucks anyway. Houses as investments, line-go-up disposable consumerism, rent-seeking, it's all fucked if you aren't born on top.
seems fine for anyone that already has a house, like everyone should (for hundreds of years)
Sadly the only way is a lot more Luigi’s. If more CEO’s start getting wigged off maybe they’ll lobby for change.
Just sad that most people have it just good enough to not want to risk prison forever to murder someone, although if I could get away with it I’d have no issue in pulling the trigger on these ghouls.
Alot of debt gets bundled into bonds or other investment vehicles and sold. So small retail investors, retirement funds, etc end up holding the bag. Sometimes the banks lose, but they can take tax write offs and if the loses are too great, they can often get bailed out by the government.
Companies are valued by earnings-per-share, independent of the assets. So if the P/E ratio is too low the company costs less than its assets and it pays off to sell the parts.
https://en.m.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
In this case I heard a rumor that Amazon did it to dominate the toy market, so losses could have been acceptable.
I certainly would not put it past them.
Look up Cellar boxing, you’ll see all the companies that were driven out of business because of this strategy
Truer now than when Henry Ford said it like a hundred years go.
The SEC exists to shelter Self Regulating Organizations from any threats of democratic governance or law enforcement. Oh ya and to keep up the legalese charade that there literally is no such thing as counterfeit stock (because the Secret Service has purview over counterfeiting for some strange reason)
Fuck the stock market 🖕
The Secret Service has purview over counterfeiting because that's what it was founded for. More confusing is why they became the presidential protection service from there.
IIRC it was Mitt Romneys firm that did it to (technically after he left leadership, if i recall)
Impossible! Mitt Romney is one of the good conservatives!
/s because tens of millions of liberals actually believe that it's true.
He is one of the ones who actually wants a functioning government.
Just saw this after making my comment. I believe it was.
Bain Capital
Not technically, it was years after he left Bain.
Wasn't it Bain Capital (Mitt Romney's old place of work), or am I misremembering?
Yes, that was one of them.
From OP
Ah, I skimmed it and must have skipped over that
It’s cool. My intention wasn’t to call you out.
Its best to plan to not have a retirement fund. Plenty of communities just take care of each other instead.
I’m not sure what you mean. We have a state pension tied to the stock market.
I also have a private pension too. I don’t see how not planning for retirement can be beneficial?
The UK state pension is largely a Ponzi scheme, no? Those paying tax now fund those receiving pensions now with some promise that they'll get returns in the future. The only difference is it's backed by the currency issuer and they're pretty up front about it.
I don’t know that I would call it a Ponzi scheme, although I could argue for it based on current trends.
Basically, the everybody pays in to the state pension with the understanding that it pays for retired people. So yes people paying in now are covering those that have retired.
The thing is now though is that birth rates are not keeping up with retirements, understandably as why would you have a child in this shit hole, so that means each year it’s harder and harder to pay for the pensioners.
The above is incredibly funny when you look at this silly anti immigration rhetoric, we need more immigration to sustain old people not less. These fools will be shocked when they ban immigration and retire and the state is like yeah we got nothing.
What’s worse is it isn’t means tested which I would support but many older people don’t as they see it as they paid in expecting it back where I see it as paying in to support those that need it.
So I have two bosses one is amazing and very progressive and has never done wrong by their 6 employees. The other is not so much progressive and is soon to retire. He is selling his house for £500k, has lots in savings already and is taking his state pension because, and I quote “ I paid in so it’s mine”, now I can’t fathom this behaviour as I don’t want more than I need and would happily not take money if I can support myself.
Alas, these are the people that vote so we are fucked.