Yet Another Thing That Private Equity Wants to Ruin

This time, it's worker owned cooperatives.

Short version, PE has bought a lot of crap, and with interest rates rising, they are desperately looking for some rube to foist this garbage off on. 

So, they will polish the proverbial turd, provide dishonest numbers to the workers, and get them to overpay for the deal:

A recent Financial Times article on private equity woes in an era of high interest rates contains many amusingly coded admissions against interest. Before we get to the industry’s new clever gimmick, that of dumping companies on new greater fools, here their employees, we’ll look at some of the discussion of oh how hard it is to be private equity kingpin when the Fed no longer has your back.

The opening whinge is the canard that private equity funds can’t sell the companies they own:

Higher interest rates and a still sluggish new listings markets have made it harder to sell holdings and return cash to investors. That in turn has made it more difficult to raise new funds because pension funds, endowments and family offices have less money to allocate and a growing array of other options.

The people who run these funds and their investors are presumably investment literate. The first rule of finance is that every problem can be solved by price. The problem here is not that these companies cannot be sold, but that their private equity masters don’t like the prices they would fetch.

You can always sell something, but they want someone to overpay for the privilege.

………

Ahem. For those who have followed the tale of increasing wealth at the top, the way to share the benefits of productivity gains with workers is via higher wages, not by giving them less pay than they should get and giving them equity or equity chits at a valuation over the fair market value of the business.

Admittedly, employee ownership can be very motivating and productive when employees really do own the company, as opposed to being along for the ride, as the are here. But even then, advocated of employee stock ownership programs would warn that they could represent a danger to the financial health of the employee-investors. They are already heavily exposed to the fate of the company by virtue of working there. If it has a disaster, like an explosion at a key operation, its staffers could suffer big pay cuts or even job losses. Having some or a lot of their net worth tied up in the company increases their exposure.

Remember Liz Warren's bill that I mentioned a few months back?

It's this sort of sh%$ that shows that she does not go far enough.

Claw-backs and criminal prosecutions for everyone, please.