So a private equity (PE) firm finds a vulnerable company with relatively good brand recognition. We will call this the Patsy Company.
The PE Firm uses their money to buy enough shares to own a controlling interest in the Patsy Company
Because they own a controlling interest in the company they are allowed to elect a certain number of members to the Patsy Company's board of directors who then elect a CEO approved by the PE firm.
Low and behold the PE firm owns other businesses that can feed into or be suppliers of the Patsy Company.
Red Lobster was the Patsy Company.
The PE firm bought a controlling interest in Red Lobster and put stooges on the board.
The PE firm also owned one of 5 major global shrimp suppliers. This one was based in Vietnam.
The PE Firm used the stooges they put on the board to "negotiate" exclusive contracts with the PE Firm's Vietnamese shrimp supplier. In these "negotiations" the stooge board members controlling Red Lobster agreed to pay ridiculously high prices for the shrimp that the Vietnamese Supplier (owned by the PE firm) sells.
Around this time the PE firm begins to short the stock of Red Lobster. When you short a stock you borrow the stock from the market at the current price and then sell that stock on the market to buyers. This brings in cash.
You agree to return to the stock market the same number of shares of stock that you borrowed by a certain date. Interest accumulates on this "debt" of stock that you own. If the stock goes down after you borrow it and resell it, then you make money on the transaction.
So the PE firm that OWNS a controlling interest of stock in the Patsy Company begins to short the Patsy Compamy's stock using various veils and other entities. We will get to why they do this later.
The PE firm shorts the stock of the Patsy Company KNOWING that their board members are INTENTIONALLY making bad business decisions in an effort to kill the Patsy Company. This nets them ALOT of profit as the Patsy Company's stock declines.
In this case, the board of Red Lobster (The Patsy Company) which was controlled by the PE Firm agreed to grossly overpay for shrimp. They bought this shrimp exclusively from a Company the PE Firm owned generating large profits for the PE Firm through the Vietnamese shrimping company.
They even did the endless shrimp promotion so that they could increase their shrimp purchases frpm the PE Firm's vietnamese shrimping company even though the promotion was a huge money loser for Red Lobster.
While Red Lobster is intentionally bleeding money, the PE Firm slowly and quietly shorts huge amounts of Red Lobster's stock through various shell and affiliated companies which net the PE Firm even more profits.
Now.....where things get super interesting is this.
If a company's stock performs badly enough it can get pulled off the market completely. When this happens the stock just disappears and the PE Firm never has to pay the stocks they shorted back.
If the stock gets pushed low enough then the PE Firm could potentially buy up the remaining stock of the Patsy Company and take the Patsy company private or sell off the the Patsy company's physical assets.
In this case, their biscuit recipe, shipping entities, and real estate for even more profit.
Basically what happens is these guys game the system to intentionally kill a Patsy Company.
While they are killing the Patsy Company, they use any other companies they own to leech off of the Patsy Company's revenue like a parasite to boost the profits of their other companies. They profit off of borrowing and shorting the Patsy Company's stock.
Then they sell the shell if the company to eek the last smidgen of money out of the company that they can.
And VOI LAH Now you have made billions from not producing anything, but intentionally destroying a business and at no risk to yourself becuase you knew all along your goal was to kill the company eventually. You just have to keep the game going long enough to bleed as much revenue as possible and string out how slow you can short the stock.
Mitt Romney became an expert at this and that is how he made his money. It is also why he is a sleezey asshat who wears mom jeans while pretending to be some moral compass even though he made millions destroying companies, killing jobs, and cannibalizing viable businesses.
Yeah....I hate that twerp.
