I have been baffled by the whole private equity as portfolio savior thing.
Since the mid-90s, I have worked in companies that were partially or wholly owned by an ESOP for much of the time. One of them has gone public while still having the ESOP. To my mind, ESOP is a form of private equity when the company with the ESOP is still privately held.
The main difference I have seen when between the ESOPs when the companies are privately held or publicly traded is that the privately held company uses a fairly complex valuation process by a third party (ESOPs are subject to ERISA, so probably less financial fun and games than true PE) where public market valuations are only part of the input. So the share price tends to fluctuate less and is also set once a year, so people who retire that year know the share price. Publicly traded companies have the ESOP share price set by the public market, so it fluctuates hourly and is subject to all the market emotions, good and bad.
Beyond those differences, I haven't seen any significant change in how the companies were managed, although the public company has more Sarbanes-Oxley focus on reporting financials. I have never understand why private equity would be a magic elixir for creating lots more profit out of a company. That is generally just management quality which can be good or bad in both private and publicly held companies.
ESOPs don't have much in the way of fees either than some administrative costs, although they can blow up if used as tax dodges related to Subchapter C and S companies (e.g. Sam Zell and Chicago Tribune). Private equity seems designed to provide lots of fees to the private equity managers. It is hard for me to see how paying lots of additional private equity management fees somehow creates more profits from the company itself. So I think this is somewhat like the comparison of low cost index vs active management mutual funds - less than 10% of fund managers regularly beat their indices, not necessarily because they are bad managers but because they simply can't overcome the headwind of additional costs.
Hah, Id love to live in 1960s CA again--housing was cheap, we had a place in Laguna a block from the beach so I grew up surfing instead of playing football. Traffic was only at rush hour around LA. Wages were good and the place was wide open still.
That was because they were building new subdivisions in former farmland using FHA developer loans and buyers got FHA mortgages (minorities need not apply for them, because the development covenants and FHA regulations prevented them from getting mortgages).
Now the residents of those subdivisions vote to prevent denser "affordable" housing in their communities.
Baby boomers own many of the houses. Everybody is ticked that they aren't selling their homes (that have <4% mortgages or owned free and clear). One of the things that will hold up those sales is the lack of smaller, accessible, affordable places to move into because they voted against their construction. New household formation means that new dwellings are required of all shapes and sizes. Just zoning for 2,500 sf+ single family of homes won't do that. A wide assortment of housing from senior living centers to affordable apartments and townhomes, to 1,000 sf to 2,500 sf single family homes on the small lots similar to the 50s and 60s will be needed.
A housing model reliant on 0.5-3.0 acre lots with 2,500+ sf homes is not going to work. The cost of the extra roads and utilities for those alone is going to be high and the commuting distances will continue to increase. It also puts more housing into the wildfire-flood interface which is why disaster costs are skyrocketing and insurance is becoming unaffordable or unavailable. The wildfire-flood-debris flow cycles in California was well-documented in John McPhee's 1988 article "Los Angeles Against the Mountains." Building continued unabated. https://www.newyorker.com/magazine/1988/09/26/los-angeles-against-the-mountains-i
I have been baffled by the whole private equity as portfolio savior thing.
Since the mid-90s, I have worked in companies that were partially or wholly owned by an ESOP for much of the time. One of them has gone public while still having the ESOP. To my mind, ESOP is a form of private equity when the company with the ESOP is still privately held.
The main difference I have seen when between the ESOPs when the companies are privately held or publicly traded is that the privately held company uses a fairly complex valuation process by a third party (ESOPs are subject to ERISA, so probably less financial fun and games than true PE) where public market valuations are only part of the input. So the share price tends to fluctuate less and is also set once a year, so people who retire that year know the share price. Publicly traded companies have the ESOP share price set by the public market, so it fluctuates hourly and is subject to all the market emotions, good and bad.
Beyond those differences, I haven't seen any significant change in how the companies were managed, although the public company has more Sarbanes-Oxley focus on reporting financials. I have never understand why private equity would be a magic elixir for creating lots more profit out of a company. That is generally just management quality which can be good or bad in both private and publicly held companies.
ESOPs don't have much in the way of fees either than some administrative costs, although they can blow up if used as tax dodges related to Subchapter C and S companies (e.g. Sam Zell and Chicago Tribune). Private equity seems designed to provide lots of fees to the private equity managers. It is hard for me to see how paying lots of additional private equity management fees somehow creates more profits from the company itself. So I think this is somewhat like the comparison of low cost index vs active management mutual funds - less than 10% of fund managers regularly beat their indices, not necessarily because they are bad managers but because they simply can't overcome the headwind of additional costs.
It’s the unpredictable part that many in government seem to ignore since it’s hard to wrap an existing narrative around it.
Hah, Id love to live in 1960s CA again--housing was cheap, we had a place in Laguna a block from the beach so I grew up surfing instead of playing football. Traffic was only at rush hour around LA. Wages were good and the place was wide open still.
That was because they were building new subdivisions in former farmland using FHA developer loans and buyers got FHA mortgages (minorities need not apply for them, because the development covenants and FHA regulations prevented them from getting mortgages).
Now the residents of those subdivisions vote to prevent denser "affordable" housing in their communities.
Baby boomers own many of the houses. Everybody is ticked that they aren't selling their homes (that have <4% mortgages or owned free and clear). One of the things that will hold up those sales is the lack of smaller, accessible, affordable places to move into because they voted against their construction. New household formation means that new dwellings are required of all shapes and sizes. Just zoning for 2,500 sf+ single family of homes won't do that. A wide assortment of housing from senior living centers to affordable apartments and townhomes, to 1,000 sf to 2,500 sf single family homes on the small lots similar to the 50s and 60s will be needed.
A housing model reliant on 0.5-3.0 acre lots with 2,500+ sf homes is not going to work. The cost of the extra roads and utilities for those alone is going to be high and the commuting distances will continue to increase. It also puts more housing into the wildfire-flood interface which is why disaster costs are skyrocketing and insurance is becoming unaffordable or unavailable. The wildfire-flood-debris flow cycles in California was well-documented in John McPhee's 1988 article "Los Angeles Against the Mountains." Building continued unabated. https://www.newyorker.com/magazine/1988/09/26/los-angeles-against-the-mountains-i