So You Wanna Buy a Baseball Team

In a postseason full of headline-grabbing stories (the ball is de-juiced! Gerrit Cole is a cyborg! The Nationals win in the playoffs now!), a quiet bulletin came out on Wednesday. Bloomberg’s Scott Soshnick reported that Major League Baseball will now allow investment funds to take minority stakes in teams.

The news cycle moved on. The Yankees-Astros game was postponed! What will A.J. Hinch and Aaron Boone do with their rotation flexibility? Did you know Juan Soto isn’t yet 21? There are big baseball things happening right now! Investment mumbo-jumbo has a way of fading to the background.

I’m here to tell you that it matters. Not in an urgent, baseball-ends-today way, but in a way that could change the nature of the sport long-term. This story might not be on everyone’s radar right now, but it’s important to consider the ramifications and conflicts of interest that can arise from a small change.

To understand what this decision means, we’ll need a little background. First, let’s talk about what an investment fund is. It’s a broad term by design, one that encompasses many different ways of pooling together money. Without further comment from MLB, we can’t know the exact specifications of what they’ll allow, but we can make some educated guessed. A college endowment? Definitely. A special purpose fund raising money from 100 rich people to invest in teams? Certainly — one has already been started, and it plans to raise $500 million to purchase minority stakes.

What about a pension fund? Pension funds’ preferred tax status mirrors that of college endowments, and the two invest in very similar ways. A hedge fund? Baseball will have to spell out the rules, but that doesn’t seem so different from letting endowments or pensions own minority shares, and it’s certainly not much different than a special purpose vehicle. Heck, hedge funds are largely specialized investment pools already, and endowments and pensions make up a sizable portion of hedge fund assets under management.

There are some details that we’ll simply need to see. What about a mutual fund? Could a fund provider create a closed-end fund that invests in a team, or even a pool of teams? That hasn’t been spelled out. Could an ETF do the same? That would require some deft financial engineering, as ETF shares need a creation/redemption mechanism that would be at odds with the way major league ownership works, but closed-end funds behave roughly the same way.

Regardless, the general idea of this new policy is to allow a wider population of groups of people to purchase minority stakes in teams, bringing to the ownership table broad pools of money rather than single individuals. Why does baseball want to do that? Per Bloomberg: “It’s MLB’s answer to a problem affecting all the major U.S. sports leagues: Teams’ multibillion-dollar valuations have made it difficult for part-owners — known as limited partners, or LPs — to find buyers for their stakes when it’s time to sell.”

Your mileage may vary as to whether that is a problem worth solving, but let’s explain the issue. Think of it this way: let’s say a team is worth $2 billion. In theory, 49% of that team should cost $980 million, and, as so few teams change hands, that should be a valuable commodity. In practice, however, it’s hard to find a billionaire who wants to plunk down $980 million to not run the ship, to have the garish red button that says “Press for High-Dollar Free Agent” just out of reach.

Ownership structures vary, and the majority owner won’t always have complete final say over team decisions, but for our purposes here, the majority owner is the decider. The difference between 51% control and 49% control is meaningful, and it follows that not every stake is equally desirable.

To be sure, there are still plenty of good reasons to be a minority owner in a sports team. If you’d been a minority owner of the Marlins since Jeffrey Loria bought them in 2003, you would have realized a 14.4% annualized return on your investment, roughly double the return you would have gotten by investing in the S&P 500. You could sit in the owner’s box whenever you wanted, and you’d have a sweet championship ring to show your friends at the yacht club.

But even with those benefits, it’s not quite the same. Minority stakes should trade at a discount when decision-making power is a key reason to own something, and sports teams definitely fit that bill. So minority stakes aren’t as appealing as majority stakes, and that’s fine. There’s some market-clearing price for that.

The problem comes when you try to sell a billion dollars worth of minority stakes, and only a small pool of people are eligible to buy. When teams cost $125 million, you might be able to cobble together 12 well-to-do businesspeople and get them to each pony up $5 million, getting you a $60 million minority share. It’s trickier to get $50 million from each of them, let alone $100 million. Minority stakes in teams simply don’t have enough demand, it seems, to meet the supply of people wanting to cash in on their gains, and it’s creating an illiquid market.

Opening up ownership to investment funds is a good way to bolster demand. Find an investment with an expected return of 14% a year and you’ll have no trouble attracting institutional investors to buy a share. It’s not at all a question of whether there’s enough money bouncing around — CalPERS, the pension fund for California’s public employees, had a total market value of $381.49 billion as of October 14, and they’re one of many pension funds struggling to find returns. Funds like that would surely love to invest $500 million, or even $5 billion, into something with such a high return.

But in solving the plight of the minority-stake-holding millionaires, baseball would create a new problem. Think about this CalPERS money as if it were your pension, or part of your retirement savings. You, Alex Smallbanks, might have a 0.000262% interest in CalPERS (if you had a million dollars coming to you), or you might have far less. You won’t be part-owner of the Dodgers in a meaningful way, even if the fund were to invest in a 25% stake in the team.

It’s rational, and even prudent, for an investment fund to prioritize profit to the exclusion of everything else. Depending on the type of investment fund, its decision-makers might even have what’s called fiduciary duty, the responsibility to act in a way that best serves the client’s financial interests regardless of their own views. For most businesses, that isn’t a problem. If a fund buys a stake in, say, a publicly traded pizza company, the system works. The pizza company tries to make as much money as possible, consumers try to get the best deal on their pizza, and everyone, for the most part, is fine with this kind of bargain — the pizza company’s success, measured in dollars, equates to the pensionholder’s success, and the company succeeds by making the best pizza for the lowest price.

That’s how capitalism works, and while I’m not going to get into a debate about the merits of that economic system as a whole, you don’t have to be a skeptic to realize that the system might not work that well for sports teams. Sports teams, at least nominally, aren’t run as profit-maximizing enterprises with no other goals. They’re civic enterprises, competing for titles, and they care about winning for its own sake.

To some extent, that’s a naive view. Teams care a ton about payroll, and every time that the Red Sox say they’re working to get below the tax threshold or the Blue Jays brag about years of control, the cracks in that worldview grow slightly wider.

But those cracks come about because we want owners to care exclusively about making the team the best it can be, while they only care partially. That’s not the same as being purely profit-driven, not even a little bit. Ask an owner if they’d accept a deal that would cost them $20 million upfront, net them $15 million in increased revenue, and guarantee them a World Series title, and I’m pretty sure they’d take it even if they knew it was a small money loser. You probably don’t buy a sports team and not want the prestige at all.

But it wouldn’t work that way if ownership were an investment fund. The fund has a duty to its stakeholders to maximize profit. Those stakeholders don’t vote on every single decision that every company the fund has any interest in makes; the fund makes decisions on their behalf by trying to maximize profit.

Let’s go back to our Alex Smallbanks example from above. You, Alex, have a small share of every single investment your pension fund makes, but you almost certainly don’t know the names of all the companies, bonds, and derivatives the fund invests in. You probably wouldn’t even know you were a part owner of a baseball team. As far as you’re concerned, your pension is just a number that grows, and it’s in your interest to have that number grow as quickly as possible.

Now imagine the process a pension-owned team would have to go through to construct its roster. Want a fourth outfielder? You better be able to show that the fourth outfielder will increase revenue by more than his salary, through increased attendance or a better TV deal or a greater likelihood of playoff berths and the accompanying windfall.

It gets even murkier when you consider how this works with baseball’s current revenue environment. Between revenue sharing and TV deals that lock in for decades at a time, there’s an argument to be made that trying to win isn’t economical anymore, that you should collect RSN fees and revenue sharing and cool it on player expenditures. That’s bad for baseball, and it feels like it’s already happening to some extent, but what we’ve seen so far might pale in comparison to what would happen if every decision had to maximize profit.

Of course, that’s not what baseball is proposing right now. As reported, they’re only offering minority stakes. In theory, the majority owners who are in control today will still be in control even if an investment fund buys up their minority stakes. But in practice, it’s a dangerous road. We aren’t privy to the internal articles of incorporation for ownership groups, but what’s to stop a hedge fund from teaming up with a billionaire to jointly buy a team, with the hedge fund acquiring a 49% stake but also dictating profit-maximizing rules the majority owner must follow? What’s to stop two investment funds from each acquiring 30% stakes, then teaming up to vote together and acquire effective control?

Without more details, we’re left to make educated guesses about the consequences of this decision. Maybe MLB has all the loopholes covered, and it will just be business as usual, the changing minority stakeholders invisible to our eyes. Maybe they had this figured out all along, and streamlining the market for buying and selling teams will be beneficial. Heck, maybe widening the ownership pool will help curtail some of the sport’s worst player-acquisition practices — owners get access to a team’s books and records, and pension funds and endowments have little tolerance for the types of behavior some teams have exhibited in the past.

But I’m skeptical. It seems pretty clear to me that maximizing profit and maximizing winning won’t always have the same solution. It’s also clear that investment funds will come down on the profit-maximization side of the equation every time. They should! They have a fiduciary responsibility to the people whose money they’re managing.

A college professor once told me something that has stuck with me ever since. Corporations are incredible vehicles for maximizing profit. Put them in any scenario, and they’ll tend towards profit optimization. The goal of regulation, then, should be to design incentives for these companies such that profit-maximizing behavior also maximizes the greater good.

Baseball, right now, doesn’t have regulations that maximize the greater good of the sport. There’s no salary floor, and little that stops teams from manipulating players’ service time to delay the free agency of young stars and keep payrolls down. Put a team in the hands of an exclusively profit-maximizing actor, rather than a sometimes profit-maximizing actor, and I don’t think we’d like the results.

It’s still early days in this discussion. Someday, presumably, an owner will want to cash out a majority share and won’t be able to find a suitable bidder, and they’ll pressure the league to allow investment funds to take majority stakes. When that happens, I hope there’s an earnest and realistic discourse about it. Investment funds are a practical way of letting many people invest intelligently without having to become subject matter experts in every single industry. I’m just not sure that baseball, as it’s currently set up, is ready for the pure dollar efficiency they bring.

We hoped you liked reading So You Wanna Buy a Baseball Team by Ben Clemens!

Please support FanGraphs by becoming a member. We publish thousands of articles a year, host multiple podcasts, and have an ever growing database of baseball stats.

FanGraphs does not have a paywall. With your membership, we can continue to offer the content you've come to rely on and add to our unique baseball coverage.

Support FanGraphs




Ben is a contributor to FanGraphs. A lifelong Cardinals fan, he got his start writing for Viva El Birdos. He can be found on Twitter @_Ben_Clemens.

newest oldest most voted
mike sixel
Member
Member
mike sixel

So in a few years, it will be like Sears or other huge brands destroyed by funds….. And that’s an example, not the main cause of Sears fall…. And I say this as someone that has an MBA and was a leader in a huge org….. Investment firms would be bad for the game. Very bad.

That said, I’m not sure what long term alternative there is….

Clock
Member
Clock

I’m sure the trends in the retail industry had nothing to do with Sears declaring Chapter 11. Let’s not forget that investment firms have absolutely zero responsibility for any of the success stories we see today (Amazon, Uber/Lyft, Facebook).

sadtrombone
Member
sadtrombone

Uber/Lyft are not success stories. They are extremely unprofitable ventures whose only hope is that they solve driverless cars and fire all the drivers. I have no idea what the investors in Uber/Lyft are thinking; their path towards actually being a business that makes money instead of loses it is perilously slim.

Besides, you and Mike are talking about two different things. Funding startups is different than having a leveraged buyout of a longtime brand, stripping the company of resources while piling up more debt and declaring Chapter 11.

Monsignor Martinez
Member
Monsignor Martinez

This comment made me genuinely curious about the success of Uber, as I just assumed that it was a huge successful business; then I looked it up, and sure enough, I found that they were operating at a $5 billion loss. Thank you for the information.

Alvaro Andrés Pizza Varela
Member
Alvaro Andrés Pizza Varela

Uber’s objective is to bankrupt taxis and public transport, so they become a monopoly. They’re dumping public transportation.

martyvan90
Member
martyvan90

That’s always the knock against disruption. They’re attacking my status quo and I don’t like it.

Clock
Member
Clock

Yea they lose a lot of money right now because they are fighting over market share and are still in growth mode.

dukewinslow
Member
dukewinslow

Uber loses a billion dollars a QUARTER. Also, their exit strategy is to suddenly own a fleet of rapidly depreciating assets that they will have to insure. Super fun.

Clock
Member
Clock

I’m not saying it’s the best biz idea ever, I’m an uber/lyft profitability skeptic myself, but there’s no way a startup going from a literal figment of an idea to being valued over a billion dollars is not defined as a success.

sadtrombone
Member
sadtrombone

So the $5 billion number is a little high, because a lot of it is related to them going public. But it’s still bleeding more than a billion dollars every quarter. Every quarter! The argument is that “they’re expanding, of course they’re losing money” but it doesn’t change the fact that the “rides” part of their business is losing money. So what’s happening right now is that investors are “subsidizing” your ride on Uber–the exact number depends on how you calculate it, somewhere in between 20% and 40%. I would expect a similar number for Lyft as well (although Lyft’s numbers don’t get as much scrutiny, I can’t imagine they’re that different).

For a long time, people operated under the assumption that their plan was to be like Amazon–take a loss to drive out competition, then make money. But while Amazon was certainly willing to take a loss on many of their specific transactions, that’s not revolutionary–it’s the idea of a loss leader. You lose money on the thing that gets the customer in the door, to sell them something nicer or higher profit margin or something (this is why the rotisserie chickens at your local supermarket are likely so cheap). But they can’t do that; the only thing they’re offering is a ride. Amazon never lost this much money, not even close to it. Instead, they have to dramatically raise prices, which leaves them vulnerable to people turning to things like cars or buses or other alternatives instead; or they have to cut costs, which is virtually impossible unless they master driverless cars and fire the drivers. Also, they’ve somehow managed to avoid all of the relevant regulations that govern them, including on paying their workers, and their continued profitability requires them continuing to flout regulations and get away with them. All of this is to say, they’re screwed.

Clock
Member
Clock

They have uber eats which grew 149% in 2018.

dukewinslow
Member
dukewinslow

Uber’s also a weird valuation because it’s essentially driven by a single fund (softbank vision fund) funded in essence by a single investor (the Kingdom of Saudi Arabia). Saudi Arabia is basically subsidizing everyone’s rideshare. VC is in a….. very weird place right now.

sadtrombone
Member
sadtrombone

Softbank?!? Isn’t that the group that poured all that money into WeWork? I hope the King likes losing money.

dukewinslow
Member
dukewinslow

Yeah, same fund as WeWork. Vision fund is screwing everything up in terms of valuing companies like this. They (softbank) burned 7 billion dollars pre IPO on Uber, an are now nearly a billion underwater on their stock (per bloomberg). I was told that Uber’s bankers had to call in a ton of favors to even make the market on the IPO (that is, no one wanted to buy the stock), but I can’t find independent confirmation of that online.

nooten
Member
nooten

That’s an interesting point, that Saudi Arabia is one of Uber’s largest backers. Is that true? Saudi Arabia’s economy is obviously built on oil…studies show that services like Uber and Lyft actually INCREASE the amount of traffic on the road — and, with it, fuel consumption. I wonder if the KSA has this in mind?

sbf21
Member
Member
sbf21

First of all, Uber had a TON of wealthy private investors who bought in before they came public with their IPO.

Second, Softbank is a Japanese company, not Saudi. It is run by Masayoshi Son. They are the largest investor in the (thankfully) massively devalued WeWork.

dukewinslow
Member
dukewinslow

Softbank (a japanese bank) raised money from KSA for their vision fund- 48 billion or so of the 50 billion “Vision Fund” is KSA sovereign wealth. It’s unusual that a fund is basically funded by a single actor, but not as rare as you’d think. It’s VERY unusual that it was so poorly disguised. They must love Son, for some reason.

The Vision Fund put 7.6 billion in cash into uber, for a stake that’s 1 billion underwater after the IPO (irony is that even early investors are taking a bath).

KSA—–> Son’s Vision fund at Softbank—-> Uber. It’s not that complicated, in an industry that tends to be complicated. the proportion of Uber’s operating costs that 7.6 billion that softbank lit on fire represents? I dunno, seems like roughly 60-70% of their losses, as far as the roadshow suggested.

Nats Fan
Member
Member
Nats Fan

Amazon lost money for a decade before it made money.

sbf21
Member
Member
sbf21

Rides are subsidized by investors and drivers who make next to nothing after accounting for their auto insurance, depreciation on their car, gas and tolls, the double tax hit for Social Security, and health care coverage.

greenaway55
Member
Member
greenaway55

They lose money on literally every ride. The ringer has a good video on YouTube if you’re curious.

https://youtu.be/-RUBCU_6mjc

Clock
Member
Clock

Uber/Lyft went from $0 to multi-billion dollar valuations in less than 10 years–I would define that as success. Their IPOs created millionaires overnight among ordinary employees who were granted stock options.

Sears had a high likelihood of going bankrupt regardless of the PE investors. Just walk into a Sears store 3 years ago and you can see why. Those stores were so old, and out of touch with today’s consumer and market environment (see: Amazon). The firms were investing in the Sears brand, which despite its declining sales and market share still had value, in hopes or revitalizing and turning around the business. Difficult to do so without an abundance of capital, which can be made available through debt. The retail industry traditionally run high debt loads to begin with.

There are thousands of success stories in the leveraged buyout space. Many are business of which you and I have never heard. Most businesses that have IPO’d and were owned by a PE firm are likely a very nice return for the private investors (which usually include pensions and endowments as beneficiaries, so the layman wins as well). Companies sold privately also yield strong returns since strategic buyers are willing to pay a premium, and even other firms are willing to pay up since there is so much capital floating around in the private markets. The media never covers these stories though; they only cover the stories when jobs are lost and debt was used, and yes it’s a shame that jobs are lost no doubt, but many jobs are created within portfolio companies of the investment industry as well, and this is often overlooked.

BillClinton
Member
BillClinton

Their valuations are absolutely meaningless. Look at WeWork right now. Same story, different dance.

Clock
Member
Clock

Wework has legit conflict of interest and governance issues. Different story.

martyvan90
Member
martyvan90

Absolutely agree. You have researched the business model.

Sarachim
Member
Sarachim

The trouble here is that you’re defining “success” as “make a bunch of money for investors who manage to cash out.” The fact that investment funds define success in this way is exactly what this article highlights as a problem re: MLB. (It is also, arguably, a problem in every industry for labor, consumers, and the environment)

sbf21
Member
Member
sbf21

Uber employees were not turned into millionaires the way early employees of Microsoft were. Drivers remain exploited and poor. Don’t know what fairy takes you’ve been told but you’re way off.

stonepie
Member
stonepie

uber doesnt consider drivers employees, the state of california does though…

carter
Member
carter

Piggybacking on this, those companies are losing absurd amounts of money. Billions upon billions. Even the spinoffs are getting killed as well. I’m sure they know something that we don’t, but I am unsure what it could possibly be.

sadtrombone
Member
sadtrombone

I have a guess, but it’s nothing more than that. To a certain extent, people who are the top of the company (or any company at all) have been deliberately selected for their optimism about the future. The way this is supposed to work is that investors stop giving them money, because objectively the business model is totally unsustainable, but that’s not happening. So they just keep on plugging away with what their plan is, despite it being a waste of money.

To a certain extent, what they know is that as long as people keep on giving them more money, they can keep on drawing salaries. I don’t think they’re deliberately operating a Ponzi scheme–I think they really do believe they’ll make money someday–but the end result here is going to look like it: The people who got in at the beginning but cashed out are going to be really happy they did…and those who stick around until the end are going to lose it all.

stonepie
Member
stonepie

shades of crypto…

dukewinslow
Member
dukewinslow

until 2018 Amazon’s only profitable division was AWS (which, to be fair, they basically owned nearly all of the infrastructure on which the internet is built)

Clock
Member
Clock

Are all y’all trying to tell me you’d rather own a farm stand that rakes in a net profit of 200k a year than Amazon or Uber???

sandwiches4ever
Member
Member
sandwiches4ever

Yes, I’d rather own a farm stand with a net profit of 200K a year than Uber. Amazon would be a more difficult choice, personally. Then again, I’m not necessarily looking to completely maximize my wealth accumulation.

sadtrombone
Member
sadtrombone

If I had a stake in Uber, the primary value of it for me would be finding some other sucker to pay me money for it, so I can invest in something else.

Amazon is clearly a different story.

Thrasius
Member
Member
Thrasius

Than Uber, yes, because there is no realistic, sustainable path to profitability for Uber. Amazon is not a good comp for Uber.

sbf21
Member
Member
sbf21

How is it possible for anyone to compare Amazon and Uber?

timprov
Member
timprov

Everything people say about Uber now they said about Amazon ten years ago.
Of course they were also saying it about Yahoo and Pets.com.

Clock
Member
Clock

sears hasn’t had a profit since 2011 soo….

tung_twista
Member
tung_twista

Uber is losing a lot of money.
Uber stocks have fell about 25% in five months since the IPO.
Uber still has a market cap of $55B.

These are all true.
Calling Uber “not a success story” is applying an unrealistically narrow definition of ‘success’.

sadtrombone
Member
sadtrombone

It has been very successful at enriching people who got in at the ground floor, so they personally have been extremely successful, but as a business it’s pretty bad. The whole point is to make more than you spend, and not only is it not doing that now there’s almost no path to doing it in the future.

Thrasius
Member
Member
Thrasius

This, it’s similar to a pyramid scheme. Keep recruiting investors for the founders and early backers to cash out. Then let it crash. I doubt that was the conscious plan at the start. However, that’s essentially what will happen to Uber barring a miracle.

Alvaro Andrés Pizza Varela
Member
Alvaro Andrés Pizza Varela

Futbol Club Barcelona & Real Madrid are owned by their socis. Like the Green Bay Packers. They have more revenue than any baseball team.

Groundout
Member
Groundout

Can’t speak for the futbol, but Green Bay Packers stock can’t be sold by shareholders once purchased. So the franchise is not something that can be invested in, as described by this article.

martyvan90
Member
martyvan90

AAPV, if a company has a lot of “revenue” but generates no profit is that a good thing?

jfree
Member
jfree

Real Madrid is able to generate tons of profit. Forbes values it at $4.2 billion and globally it competes with Dallas Cowboys, NYY, and Manchester United as the most valuable sports franchises . In addition to attendance and other ‘local’ revenue, it generates sponsorship (eg 1.8 billion over 10 years from Adidas), media rights, etc.

The difference is that because the owners are basically the fans, those profits get plowed back into the product on the field and in the stadium.

Thrasius
Member
Member
Thrasius

BVB Dortmund in the Bundesliga is a publicly traded company in Germany.

Matt Wallach
Member
Matt Wallach

Was going to make a comparison to some European soccer teams, but I don’t know quite how it works in Spain with those clubs, but isn’t that Packers “ownership” thing mostly a myth anyway? They offer “stock” only once every few decades and the stock can’t go up or down and you can’t sell it. From what I understand, the only things Packers “shareholders” receive is a trip to the annual meeting and a certificate, with the special ability to buy exclusive merch. It sounds like a fan club to me, rather than an actual wise investment. It’s more like people actually buy it so they can say they “own” a football team, when in reality, they are essentially just another fan, who gets some special perks.

Now, there are several European soccer clubs and European racing teams that are publicly traded, but I’m not as familiar with how it would work to be an investor of those, but I imagine it’s not like the Packers at all.

jfree
Member
jfree

It sounds like a fan club to me, rather than an actual wise investment.

Depends what you define as ‘wise’ investment. You define that as extracting money from the business in order to fund a vacation for yourself? As putting in the capital needed to fund a team in order to watch a better team play the sport on the field?

The first definition is presumably the one that MLB owners now want to encourage – and no doubt that will be the definition that is most attractive to the hedge fund, pension fund, and luxury-box buying crowd who are perfectly content to suck on the taxpayer-teat for that ‘fan club’ perk without actually paying the cost.

perkins
Member
Member
perkins

Just throwing this out there for discussion, but what do you guys think about having the cities where teams reside able to invest in those teams, in concert with them receiving redevelopment funds for new stadiums and other things. I’ve often thought this could be a best-case scenario for the future of team ownership, and it could also help prevent teams from relocating, which is something I hope we can all agree is terrible.

jfree
Member
jfree

I think everyone except MLB can agree that teams relocating is terrible. For MLB that threat is exactly what allows owners to suck at the taxpayer teat.

stonepie
Member
stonepie

well if teams are going to use tax money to fund their stadiums, citizens who pay taxes to fund said stadium should get monetary value back. “oh but you get a new stadium!” doesnt cut it if me and others have to fund your business and you privatize the profits.

Clock
Member
Clock

FTR, Sears hasn’t earned a profit since 2011.

And it’s not like Sears is dead. It’s in Chapter 11, so it can restructure and come back, and their CEO is going down (or up) with that ship it seems no matter what.

mike sixel
Member
Member
mike sixel

Fine, I could have named about 10000000 companies that no one has heard of……and I literally said it wasn’t the main reason….bur sure.

Clock
Member
Clock

bankruptcies are definitely not the majority of outcomes for PE. if they were, there would not be a PE industry. there’s numerous unheard stories of companies growing like weeds, and as a result, job creation, due to PE capital infusions.

martyvan90
Member
martyvan90

Sears failed because they weren’t customer focused 25-30 years ago. Good products but poor customer experience.

drewsylvania
Member
Member
drewsylvania

Just like with taxis once ridesharing appeared!

ziprel
Member
Member
ziprel

https://prospect.org/economy/sears-gutted-ceo/
and if you want the ‘establishment’ article
https://www.forbes.com/sites/adamhartung/2016/02/11/the-5-ways-ed-lampert-destroyed-sears

Sears failed because it was systematically and deliberately destroyed by its PE owners

Clock
Member
Clock

Lampert runs ESL Investments, which is a hedge fund, not a PE fund.

tippie
Member
tippie

Lots of reasons Sears failed, but all stem from being a dinosaur and unable to drastically adapt their business model.