The Secretive Industry Devouring the U.S. Economy

[Celerity]

Private equity has made one-fifth of the market effectively invisible to investors, the media, and regulators.

https://www.theatlantic.com/ideas/archive/2023/10/private-equity-publicly-traded-companies/675788/

https://archive.ph/tewjm



The publicly traded company is disappearing. In 1996, about 8,000 firms were listed in the U.S. stock market. Since then, the national economy has grown by nearly $20 trillion. The population has increased by 70 million people. And yet, today, the number of American public companies stands at fewer than 4,000. How can that be?

One answer is that the private-equity industry is devouring them. When a private-equity fund buys a publicly traded company, it takes the company private—hence the name. (If the company has not yet gone public, the acquisition keeps that from happening.) This gives the fund total control, which in theory allows it to find ways to boost profits so that it can sell the company for a big payday a few years later. In practice, going private can have more troubling consequences. The thing about public companies is that they’re, well, public. By law, they have to disclose information about their finances, operations, business risks, and legal liabilities. Taking a company private exempts it from those requirements.

That may not have been such a big deal when private equity was a niche industry. Today, however, it’s anything but. In 2000, private-equity firms managed about 4 percent of total U.S. corporate equity. By 2021, that number was closer to 20 percent. In other words, private equity has been growing nearly five times faster than the U.S. economy as a whole. Elisabeth de Fontenay, a law professor at Duke University who studies corporate finance, told me that if current trends continue, “we could end up with a completely opaque economy.”

This should alarm you even if you’ve never bought a stock in your life. One-fifth of the market has been made effectively invisible to investors, the media, and regulators. Information as basic as who actually owns a company, how it makes its money, or whether it is profitable is “disappearing indefinitely into private equity darkness,” as the Harvard Law professor John Coates writes in his book The Problem of Twelve. This is not a recipe for corporate responsibility or economic stability. A private economy is one in which companies can more easily get away with wrongdoing and an economic crisis can take everyone by surprise. And to a startling degree, a private economy is what we already have.

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[Texasgal]

1. Private doctors offices and practices

are now becoming more and more acquired by private equity.

The surgeon I recently worked for sold out and the "reorganization" was an absolute nightmare.

Be forewarned, your local doctor is most likely no longer "independent"

[Marcus IM]

4. Where I grew Drs still make house calls annually

More Drs per capita than most everywhere. An all public system.

[Kablooie]

11. That's why I switched to Kaiser Permanente.

We tried PPOs and HMOs. Both were terrible.
We've been much happier with Kaiser. The give good, consistent care at a very reasonable price.
My wife needed a very rare cancer surgery at a specialty cancer center that was outside of Kaiser's network.
The total cost was over $200,000 with a two week stay in the hospital.

Our portion of the $200,000 was $45. (plus parking)
Kaiser covered the rest.

[msongs]

2. take it private, strip the assets, sell off anything worth a cent and get rid of the workers nt

[LastDemocratInSC]

7. That practice is the result of what is now known as "financial engineering".

[Marcus IM]

3. The greatest nation. Envy of the world.

I hear that so many times it's dizzying. I ask if they have a passport and travel places.
No is the most common answer.
Of course, those who do travel don't repeat the constantly repeated dogma.

[sakabatou]

5. Equity firms have screwed so many companies over

"Hey, this business is failing and it's not making profit. Let's destroy it/make everything corporate!

[dalton99a]

6. Kick

[jmbar2]

8. Not to mention the takeover of housing causing costs to become unaffordable

I hope they all crash and burn.

[rubbersole]

9. And they're hoping we do.

They seem to be winning.

[jmbar2]

10. I'm wondering at what point they hit a tipping point

So far, enough people seem to be scraping by to pay inflated rents, but housing is way out of whack with wages. Seems like there would be a tipping point extraction of wealth from working people runs the working age population into a ditch.

I guess that was what feudalism was all about.

[sanatanadharma]

12. Great thinking starting point Feudalism

What is feudalism about? What is the heart, the nature of feudalism?

We can look back in history to see the past trajectory (like the wake of a boat) through and beyond that feudalism took.
We can project our future by seeing how our path continues. Does the wake ever suggest changing directions?
Is feudalism based upon some sibling rivalry and the refusal to share?

But back to first thought, feudalism implies someone owns it all and others may or may not have access to any or little of the 'private-wealth".
"All deer belong to the king, throughout the realm. Go starve elsewhere, peasant!"

Then came the era of the common-wealth and America was born.
Then financial-corporate capitalism took away the common-wealth and private equity erected walls and fences.

The Lords of the past are now the Private-Equity owners of more and more of the present.
Who's going to own you?

Present day selfishnesses (plural as the are in the hearts of two too many), are why are children die, bleeding out in their classrooms.

[DFW]

13. I see Blackstone at the top of the list

They bought out a company that two of my friends owned a 12% interest in. They had owned it for a very long time, and had a hand in structuring it and making it run solidly, but never had a say in its day-to-day operations. It is sort of a niche outfit, but a very large niche. Blackstone bought it for half a billion dollars, and the head guy, who owned about half of it, is now set for life. After taxes, he now suddenly has $200 million to play with, and my two friends suddenly have, after taxes, about a quarter of that each.

I can't even conceive of having that kind of money free and clear after having paid all taxes due. I know one of them set up two charitable foundations, one for helping kids struggling with drug addiction (one of his was), and the other for promoting and furthering education in Texas (we could use it). He figured (like I would have), what am I gonna do with it? Wait until I die with it? What the others are doing, I have no idea. But since the company that Blackstone took over can only survive if it maintains the highly-paid experienced guys working there, and seems to be firing the knowledgeable ones in favor of younger, inexperienced ones (they're way cheaper), I see a possible parallel to what happened with Twitter. MAYBE this outfit was really worth $500 million--I have no idea how one comes up with these numbers--but if their new management continues its ways, it soon will no longer be worth anywhere near that. Y-a-t'il un pilote dans l'avion?

[RSherman]

14. Books about this

I just read "These are the Plunderers" and "The Privatization of Everything". I could only read one chapter at a time because the whole thing is so disturbing. A few people control everything. And regulators, CEOs, and legislators move back and forth seamlessly. Regulators whose duty is to protect consumers/employees/taxpayers begin to see how much $ can be made with private equity, so they become CEOs. Once CEO, they see what stands in their way. They become legislators to change the laws in their favor, then move back to private equity.

[pecosbob]

15. Sounds like the intro to a dystopian video game like Fallout