How Unprofitable Companies Stay In Business

I worked for yellow for seven years. The CEO and other board members never failed to give themselves a performance bonus. They also spent money on side projects to avoid loan repayments. The company was horribly mismanaged for over 15 straight years.

A famous french writer once said : "you don't die because of debts. you die when you can't get new ones". The founder of Altice said : "When I got my first 50k buisness loan, I couldn't sleep - if I failed, I would have lost everything. Now I owe more than 50 billions and I sleep very well - my bankers don't".

In my opinion, a housing market crash is imminent due to the high number of individuals who purchased homes above the asking price despite the low interest rates. These buyers find themselves in precarious situations as housing prices decline, leaving them without any equity. If they become unable to afford their homes, foreclosure becomes a likely outcome. Even attempting to sell would not yield any profits. This scenario is expected to impact a significant number of people, particularly in light of the anticipated surge in layoffs and the rapid increase in the cost of living.

The problem is they let small zombie businesses die but when large businesses go bankrupt the government swoops in and bails them out even if they are malicious or did wrong with the profits.

CNBC is amazing. “How to build wealth”

The bigger question is how many of these "zombie" companies are propping up the employment rate. Likely a good amount. If they go, employment will suffer. I've personally worked at at least 2 companies where the finances didn't make sense, and they should have gone out of business (one of them did)

I’m surprised it wasn’t mentioned how these companies just rolling their debt into more loans to the point that their loan payments exceed their profits. These companies are basically alive just to make loan payments on their debt. At that point, someone has to call it quits

Cheap debt and low corporate taxes ONLY give incentive for bad products. If I want to create an LLC. I would have gotten a low interest loan, sold a bunch of Chinese garbage in a market trend for 18 months, SHORTED by own company, and then allowed my company to dissolve into bankruptcy. I and my board members would have gotten rich on our profits, gotten additionally wealthy from our short positions, and then walked away unscathed after using the chapter laws and making the tax-payer fund our collapse. This model has been extremely lucrative since the 1980s.

It’s really just a question of “when are the banks ever going to take responsibility for their mistakes without asking for a bailout?”

One of the purposes of tighter monetary policy is to weed out weaker business models and stop misallocation of capital. It is a good thing, not a reason to worry.

750,000,000 bailout and yet paying $234 back… and yet when I’m late on my mortgage my house is in danger 😂

It’s not zombie firm that bothers me, it’s the bank or lender that agreed the business model was viable.

I am pro-freemarket and yet think the companies like Amazon and Uber using bussines models where they lose billions of dollars to destroy small companies on the hope of achieving monoply level control of the market shouldnt be alowed to do that

Borrow a bunch of money, pay the CEO and executives well.. then walk away before the bankruptcy.

I've worked for a few of those zombie companies. One of them did go bankrupt while I was working for them. Twenty years later, they still owe me a month's pay. Another ex-employer went out of business when they got raided by the police, but that's another story.

Lucia Nathan is a blessed trader.

PSA: do not confuse startups with zombies. If there is a clear path to profitability, it's a high risk that might pay off in the future (e.g. Uber, Amazon). Zombies are hopeless businesses in established sectors that should have disappeared long ago. Something like Sears.

Have any of you recently been monitoring your stock portfolios? I've recently suffered some pretty significant losses. A few growth stocks I had invested in looked promising at the time, but things aren't looking so good now. I thought my tech stocks would rise, but they have been falling. I've lost nearly $100,000 in the stock market.

I love how this story regarding zombie firms was released on Halloween

They don't talk about really big corps that live paycheck to paycheck in that they pay out all spare capital to investors (in the old days they saved for a rainy day). They have drastically cut or eliminated R&D, i.e. they don't have long term plans. They tell shareholders that the increase in stock price replaces payment of dividends. A hard dip is going to fulfill what Buffett says, "You don't know who's swimming naked until the tide goes out."