Post AhrWDzPiBJJkHircpM by jens@social.finkhaeuser.de
(DIR) More posts by jens@social.finkhaeuser.de
(DIR) Post #AhrTpeA7LJ9BW3po9o by futurebird@sauropods.win
2024-05-13T21:56:40Z
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Friends. I don't get it. I understand the idea of a loan: borrow money, pay it back over time plus a fee for the favor of having more money sooner. I understand having a company and taking out a loan: borrow money to do something to help the company make more money and pay it off... but it's OK you made enough that it was a good idea. But HOW can someone borrow money to BUY a company then say the cost of the loan should go on the companies books?I don't get it. :(
(DIR) Post #AhrTy82s7btKVuURtI by james@mementomori.social
2024-05-13T21:58:27Z
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@futurebird It's a great idea when you get to write the rules of acquisition and nobody stops you.
(DIR) Post #AhrUFT5t7I3AiZAXL6 by futurebird@sauropods.win
2024-05-13T22:01:38Z
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@vivtek Nobody is that magical. Come on. Why can't I borrow money to buy all the ants and then make the ants work off the debt and have every ant?
(DIR) Post #AhrUHx32idHKCL1RHk by light@noc.social
2024-05-13T22:01:46Z
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@futurebird I guess because the company counts as something you've earned from the loan, so it makes sense to be able to use the company to pay back the loan. Am I making sense here? I don't know.
(DIR) Post #AhrUK2CkWAgylnYVpA by bug@chitter.xyz
2024-05-13T22:02:19Z
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@futurebird presidents and CEOs seem to use the companies they run as their own personal checkbooks a lot
(DIR) Post #AhrUNbU5nysb3aMz2W by futurebird@sauropods.win
2024-05-13T22:02:13Z
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@light I keep trying to get it and failing.
(DIR) Post #AhrUPmO4EvH5RzaZtI by simrob@social.wub.site
2024-05-13T22:02:46Z
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@futurebird Its kind of the same principle as if the bank directly bought the company, because the bank is saying "we think you'll make enough money running this business for the business to pay back this loan."Now, of course, time and time again we've seen that letting banks get involved in investment leads to fraud, self dealing, and ultimately makes everyone who isn't a banker poorer and worse off. So what's happening isn't a good idea, but I think that's what's happening.
(DIR) Post #AhrUvXtheDWdmIX94C by Wudang96@pebble.social
2024-05-13T22:09:13Z
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@futurebird leverage
(DIR) Post #AhrVUOH7Pngq4Q6LRo by Sharksonaplane@mastodon.sandwich.net
2024-05-13T22:15:32Z
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@futurebird (depending on relevant state laws etc):A forms business entity B, which takes out a business loan to buy company C. After the purchase, company C ceases to be separate and gets folded into business entity B after the purchase so the books for biz entity B and company C are the same, which will reflect the loan amount still outstanding for biz entity B from the purchase of company C. If A decided that the now-combined entity will use company C's name, the loan will, too.
(DIR) Post #AhrVWafyHQNX6sm74C by MagentaRocks@mastodon.coffee
2024-05-13T22:15:43Z
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@futurebird It is very complicated and depends upon the type of loan, and ownership structure of the company you are buying. It also depends on who/what is getting the money from the sale. This requires a proper answer from a tax and accounting expert.
(DIR) Post #AhrVglRb6CoHP1u2lc by mloxton@med-mastodon.com
2024-05-13T22:16:38Z
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@futurebird Neat trick though, right?
(DIR) Post #AhrVihXmZT3jsxig4G by futurebird@sauropods.win
2024-05-13T22:17:03Z
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@MagentaRocks What I don't understand is how it can be anything but a terrible idea... if what one cares about is the company doing well. Which seems like it ought to matter, right? A little?
(DIR) Post #AhrW5rGkZwgIhynLt2 by not2b@sfba.social
2024-05-13T22:21:37Z
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@futurebird It wouldn't matter if the purchased company manages to pay back the loan, it would just be accounting.But the vulture capitalists have an even better trick: borrow money to buy a company, and assign the debt to that company. Then loot the company, sell it off for parts, give big payouts to the execs of the firm that bought it, split it into pieces, then declare a major piece of the company bankrupt so the debt never has to be paid. This trick has been used to get rid of pension obligations, for example.See https://www.ineteconomics.org/perspectives/blog/private-equity-is-out-of-control-and-looting-america-this-prosecutor-says-we-can-fix-it
(DIR) Post #AhrW8Z2infHZ37WWLQ by bug@chitter.xyz
2024-05-13T22:21:52Z
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@futurebird @vivtek i think the answer is that "magic" in this case is quantified on a credit report
(DIR) Post #AhrWASk1CUR25HgFZg by MagentaRocks@mastodon.coffee
2024-05-13T22:22:01Z
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@futurebird Not necessarily terrible if the funds go into the business. If the purchaser wants the business and wants to improve it they will. Venture Capitalists for example, just want to destroy. There really are too many variables which is why a tax and accounting expert is needed.
(DIR) Post #AhrWDzPiBJJkHircpM by jens@social.finkhaeuser.de
2024-05-13T22:22:38Z
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@futurebird Well... it doesn't really make sense, no. But it's not really a straightforward trade. There's always another party involved, the one who owned the company before the buy. And they want money.So they can agree to let the company bear the cost, then sell, and run off into the sunset with their piles of cash.Meanwhile, the buyer can take the loan without the cost; the company already agreed to it prior to the change of ownership!
(DIR) Post #AhrWbgcxgDloyDMRvc by ersatzmaus@mastodon.social
2024-05-13T22:28:04Z
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@futurebird It's a scam. Nothing else to get.
(DIR) Post #AhrXG8RffmwspTMqWm by tootech@things.uk
2024-05-13T22:35:18Z
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@futurebird I see it as a form of asset stripping - exploiting the rules to make money but costing society as a whole.
(DIR) Post #AhrYQnqEiYOI4EVZlg by Amoshias@esq.social
2024-05-13T22:48:19Z
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@futurebird I think the problem is that you're thinking about a company as a separate entity, rather than as a thing with an owner. You own a company worth a million dollars. I go to a bank and say "if you give me a million dollars, I will buy this company and you will have a lien on it." The bank says "okay, we will lend you a million bucks contingent on you closing the deal."When you think about it, it works the exact same way as a home loan - the property you are buying is the collateral.
(DIR) Post #AhrYUVXOiFz2SPSmKu by tob@hachyderm.io
2024-05-13T22:49:04Z
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@futurebird Well, one way to think about it is to consider the liquidity of the company.Company A makes widgets and are reasonably profitable. Most of their cash is tied up in the business of making widgets, paying suppliers, employees, distributors, etc.The current ownership is tired of running a widget company. They want to cash out and move on. So they ask, does anyone want to buy our company?
(DIR) Post #AhrYxgFXxra44u1ZAG by becomingwisest@hachyderm.io
2024-05-13T22:54:14Z
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@futurebird reading this made me assume it was about Elon somehow. But this sounds like what happened to my company. Technically we got bought/merged. But our name got kept. Part of the way to buy it was a $1.8B loan, and the combined company has to pay it back.https://digitaledition.baltimoresun.com/tribune/article_popover.aspx?guid=063bffc6-6442-45f0-9a6d-9224879f0715
(DIR) Post #AhrZwkoBd6rdshLgmm by john@sauropods.win
2024-05-13T23:05:26Z
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@futurebird It’s pretty simple really, you see corporations are people, so just as when we absorb another person, we are free to say which part of our agglomeration should get in trouble if we can’t repay the loan. Say you took out a loan to buy a snazzy white blazer. When you buy yourself an extra torso, you could say it’s that torso’s blazer, so it should pay up, right? Works the same way for corporations.
(DIR) Post #AhrcGNktFaQG5DIITI by paulc@mstdn.social
2024-05-13T23:31:25Z
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@futurebird I understand, are the investors really risking anything if they have the company take the loan. Then they figured out how to milk the company so they make money no matter how bad the business operates, such as through consulting fees (Romney eventually learned that one) or having the company buy overpriced supplies from another company owned by investors.At its best it forces management to run company better to meet payments, but it has become a scam in many cases.
(DIR) Post #AhrfNcbajisw1s5XrE by susiemagoo@mstdn.social
2024-05-14T00:06:20Z
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@futurebird Generally Accepted Accounting Practices. Whatever professionals in the industry have decided is fine and to turn a blind eye to. Lots of “professional courtesy”, which regular folk don’t benefit from.
(DIR) Post #AhrpEh4xjVZqq7CxX6 by Pineywoozle@masto.ai
2024-05-14T01:56:48Z
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@futurebird That’s your mistake. They absolutely do not care if the company does well. They sell off its assets and pay themselves bonuses and then it goes bankrupt because they saddled it with debt. Next company… lather rinse repeat. Someone else built the company not them, they don’t are about it, the employees or the town it supported. . @MagentaRocks
(DIR) Post #AhrpSuWOYDzmaJoo6a by futurebird@sauropods.win
2024-05-14T01:59:24Z
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@Pineywoozle @MagentaRocks Companies aren't the best of the fabric of communities, but they are a part of the institutional fabric that makes society work. They have institutional knowledge, they are centers of social and economic activity. Just destroying them to grind them up for parts is very short sighted and ... making things worse for profit.It's bad enough this happens to real institutions in other ways.
(DIR) Post #Ahrpbgg7OB0aG0YFmq by Pineywoozle@masto.ai
2024-05-14T02:00:53Z
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@futurebird Yep and the soulless creeps who do this don’t care about anything but money @MagentaRocks
(DIR) Post #AhsCJsQHHZDuPocPU8 by darabos@mastodon.online
2024-05-14T06:15:25Z
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@futurebird "These companies are basically buying themselves!"