It's surprisingly frequent, though generally short lived.
Legal and profitable mob run businesses are taken over vs shut down then resold once the books are clean. During World War II, Washington seized dozens of companies including railroads, coal mines and, briefly, the Montgomery Ward department store chain.http://www.nytimes.com/2008/10/13/business/worldbusiness/13i... Banks are probably the most common but it can also happen in bankruptcy.
There are more, but this is enough to show a bit of a pattern.
And you do have a good point about distressed shareholders vs distressed businesses. But either one can drop the sell price (aka, make them undervalued).
Do the terms asset stripping or corporate raider mean anything anymore?
In the 70's and 80's lots of todays big names made a fortune buying controlling shares of companies that had spent decades reducing their overheads buy buying (instead of leasing) their corp offices, factory machines, etc until the value of the real assets were greater than the stock value. Then all the assets were sold off, and leased back, with shorterm sweetheart deals that lasted just long enough for the raider to sell the resulting company to someone else (or simply in some cases shut it down).
Wall street has long sense stopped serving anyone but themselves. Its long past due for many of their activities to be made illegal.
not sure you can say this when corporate raiders and hostile takeovers were the primary cause of all of this. Big difference between 'US business' and Wall Street
From what I've seen, it's not that uncommon (eg the GM street car consipiracy). Companies aren't as overt as they used to be, but I think they still do it. One example I'm curious about is investment firms ownership in US car companies prior to the spike in oil prices and great recession.
Well, there were certainly cases where companies pioneered something and government took over later - like railways in Austria-Hungary. The conservative government in Vienna did not thin these newfangled trains could ever make money, but handed out permits to private companies anyway. Then when it saw how bloody lucrative it is, it nationalized those companies afterwards.
And there are other examples, such as the East India Company having its own army, navy and effectively ruling a big part of India at a time.
Not to mention the giants coming from privatisation of previous publicly owned industries – e.g. Deutsche Post, Deutsche Telekom and Deutsche Bahn.
The difference to the US seems to be that many businesses that grew after WW2 already existed beforehand (e.g. Aldi) and/or didn’t really grow, but still outcompete everybody else in their respective fields (SME aka German Mittelstand).
I'm curious to see some of the historical examples in America, especially if there are TONS of them. Because when I think of "American capitalism at scale" in the old days the only thing I picture are the robber barons.
No, not really. All that happened is that one set of big businesses (Bank of America, Goldman, JP Morgan) has devoured the other set (LEH, Bear Sterns, Merryl Lynch). WaMu is next on the chopping block.
The first group won, the second group lost. Big business runs as usual.
I recall a recent article about that. I really can't recall much of the detail - but it was about how after an immediate success from the monetary infusion, most of the bushiness folded shortly after because owners fell victims to corruption, extortion and crime. So yes, it is similar, but not in a good way. :)
You mean like Alcoa, IBM, Standard Oil, the Pennsylvania Railroad, American Tobacco, AT&T, Sears, General Motors, Ford, Kodak, Pan-Am, US Steel, etc?
I'd suggest studying US economic history, as there isn't a single example of a juggernaut corporation that sustained said dominance very long-term (either due to competition / changing technology or government anti-trust actions).
They sort-of were nationalized. But it was done somewhat subtly.
The existing common equity (and IIRC preferred stock) in a number of entities was massively diluted by issuing new preferred stock and warrants to the US government.
Here are two examples, they were among the worst offenders. Look at the share price for Citigroup and AIG:
If you owned pre-crisis C common stock, you're still down about 84%. If you owned pre-crisis AIG common, you're still down about 95%. (that's approximate, done by eyeballing the charts). Edit: Yahoo Finance charts have been getting worse and worse, you need to click "Max" to see the proper timeline.
I don't follow UK equities closely, but I think the same thing happened to a number of UK banks at the time. E.g. RBS.
Unfortunately the whole thing was quite uneven. E.g. Goldman Sachs took advantage of the morons at AIG who sold them very cheap "insurance" such as credit default swaps. But Goldman was made whole. What should have happened is that Goldman should have been made to share the pain.
Edit: I'm of course talking about the '08 financial crisis in general. I don't agree that the Libor scandal was significant enough to nationalize the banks as punishment. I'd much rather see a few bad actors taken out back and shot. That would be much more salutary in terms of deferring future bad behavior.
You should read "Barbarians at the Gates" if you haven't already. It's a fascinating read about the takeover of RJR Nabisco and gives a good insight into how large corporations can act in schizophrenic ways.
Legal and profitable mob run businesses are taken over vs shut down then resold once the books are clean. During World War II, Washington seized dozens of companies including railroads, coal mines and, briefly, the Montgomery Ward department store chain. http://www.nytimes.com/2008/10/13/business/worldbusiness/13i... Banks are probably the most common but it can also happen in bankruptcy.
Generally ownership is short lived though.
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