Leveraged buyouts are certainly a thing that sounds like it shouldn't be possible the first time you hear of it. It seems extremely odd that you can buy a company with money you don't have and then have the money take on that debt instead of having to take it on yourself.
As I understand it, this works by rounding up potential loans, approaching the board of the company and getting them to sign over ownership of the company for a pittance in return for the shareholders being paid out by the company using the loans you brought in. This feels more like an emergent property of the system (specifically, contract law and how publicly traded companies operate) than how the system is intended to function.
Intuitively this shouldn't be possible as it's acting against the company's own self-interest despite being in the interest of the shareholders (and the buyer), but I think "the company's interest" in practice is defined by "the owners' interest" (and the owners in this case are the shareholders, who sell the company). I guess corporations aren't people after all.
The question is who is left holding the bag? If the stakeholders get paid, they are happy. The new owner is debt free, and have an ownership, so that's good. It seems to me that it may go two ways: either the lenders will be left holding the empty bag, if they can't make the money back - and it's their fault for doing a bad due diligence; OR the company gets sold off piece by piece to satisfy creditors (if they can't make the business work), which again a good thing - what purpose serves a company that cannot produce a profit ?
This view is sufficient if you view corporations entirely as entities that serve to create profit. But this view ignores externalities which are not part of this mechanical description. Specifically, what perceived value the corporation provides that allows it to generate that profit. In Twitter's case its monetization has primarily been ads, so I'm referring to what makes people invested enough in the service to make it worth for advertisers to pay to show ads to these people.
But of course your view is what's reflected in law: the corporation exists to generate profit for its shareholders, so if killing and selling it for scrap (whether directly or by proxy in a leveraged buyout ending in a firesale) provides more benefit to its shareholders than keeping it operating at a small profit, that's the logical decision. The corporation is not really "a person", it's a vehicle for its stakeholders (or shareholders). A stable service puttering along without making big profits or losses is considered the bad ending.
> Intuitively this shouldn't be possible as it's acting against the company's own self-interest despite being in the interest of the shareholders (and the buyer), but I think "the company's interest" in practice is defined by "the owners' interest" (and the owners in this case are the shareholders, who sell the company). I guess corporations aren't people after all.
Or maybe they are too much like people. Right now there's a bunch of things that I should be doing, that would be in my best interest - continue with my TODO list, or do some exercises. Instead, I'm browsing HN. This shouldn't be possible, but it is, because I'm a human - what I want to do, what's in my best interest, and what I actually do are three different things, and rarely aligned.
(Ironically, in humans this is usually called an issue with executive functioning, whereas in companies, it's the reverse.)
As I understand it, this works by rounding up potential loans, approaching the board of the company and getting them to sign over ownership of the company for a pittance in return for the shareholders being paid out by the company using the loans you brought in. This feels more like an emergent property of the system (specifically, contract law and how publicly traded companies operate) than how the system is intended to function.
Intuitively this shouldn't be possible as it's acting against the company's own self-interest despite being in the interest of the shareholders (and the buyer), but I think "the company's interest" in practice is defined by "the owners' interest" (and the owners in this case are the shareholders, who sell the company). I guess corporations aren't people after all.