A decade ago, a hedge fund had an improbable viral comedy hit: a 294-page slide deck explaining why Olive Garden was going out of business, blaming the failure on too many breadsticks and insufficiently salted pasta-water:
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Everyone loved this story. As @ddayen wrote for Salon, it let readers "mock that silly chain restaurant they remember from their childhoods in the suburbs" and laugh at "the silly hedge fund that took the time to write the world’s worst review":
But - as Dayen wrote at the time, the hedge fund that produced that slide deck, Starboard Value, was not motivated by dissatisfaction with bread-sticks.
They were "activist investors" (finspeak for "rapacious assholes") with a giant stake in Darden Restaurants, Olive Garden's parent company. They wanted Darden to liquidate all of Olive Garden's real-estate holdings and declare a one-off dividend that would net investors a billion dollars, while literally yanking the floor out from beneath Olive Garden, converting it from owner to tenant, subject to rent-shocks and other nasty surprises.
They wanted to asset-strip the company, in other words ("asset strip" is what they call it in hedge-fund land; the mafia calls it a "bust-out," famous to anyone who watched the twenty-third episode of The Sopranos):
Starboard didn't have enough money to force the sale, but they had recently engineered the CEO's ouster. The giant slide-deck making fun of Olive Garden's food was just a PR campaign to help it sell the bust-out by creating a narrative that they were being activists* to save this badly managed disaster of a restaurant chain.
Starboard was bent on eviscerating Darden like a couple of entrail-maddened dogs in an elk carcass:
They had forced Darden to sell off another of its holdings, Red Lobster, to a hedge-fund called Golden Gate Capital. Golden Gate flogged all of Red Lobster's real estate holdings for $2.1 billion the same day, then pissed it all away on dividends to its shareholders, including Starboard. The new landlords, a Real Estate Investment Trust, proceeded to charge so much for rent on those buildings Red Lobster just flogged that the company's net earnings immediately dropped by half.
> Olive Garden and Red Lobster may not be destinations for hipster Internet journalists, and they have seen revenue declines amid stagnant middle-class wages and increased competition. But they are still profitable businesses. Thousands of Americans work there. Why should they be bled dry by predatory investors in the name of “shareholder value”? What of the value of worker productivity instead of the financial engineers?
Flash forward a decade. Today, Dayen is editor-in-chief of The American Prospect, one of the best sources of news about private equity looting in the world. Writing for the Prospect, Luke Goldstein picks up Dayen's story, ten years on:
It's not pretty. Ten years of being bled out on rents and flipped from one hedge fund to another has killed Red Lobster. It just shuttered 50 restaurants and declared Chapter 11 bankruptcy.
Ten years hasn't changed much; the same kind of snark that was deployed at the news of Olive Garden's imminent demise is now being hurled at Red Lobster.
Instead of dunking on free bread-sticks, Red Lobster's grave-dancers are jeering at "Endless Shrimp," a promotional deal that works exactly how it sounds like it would work. Endless Shrimp cost the chain $11m.
Which raises a question: why did Red Lobster make this money-losing offer?
US politicians, the courts, the media, and even unions are lining up to knuckle under to another stolen election like 2000. But preparing for a general strike is a way to counteract this seeming near-certainty, to prepare for the worst, and most importantly to change the narrative of helplessness. https://www.hamiltonnolan.com/p/what-will-you-do-if-the-election (via @pluralistic)
The crash of 2008 imparted many lessons to people who were only dimly aware of finance, especially how complexity was a way of disguising fraud and recklessness. That was really the first lesson of 2008: "financial engineering" is mostly a way of obscuring crime behind a screen of technical jargon.
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