> companies looking for short term profits to make stockholders happy rather than what's better for long term results for the stockholders or the company itself
Oh, that old trope that never dies. Companies that sacrifice the long term for short term profits have their stocks tank and go out of business.
Big investors are not the fools people imagine they are. About 3 milliseconds after they catch wind that a company is eating its seed corn, they dump the stock.
But if you are sure you've identified a company that is doing this, then short their stock and make a bundle.
Very recent example: Instant Brands. Arguably one of the most popular new markets for kitchen appliances in recent memory. Brought electric pressure cookers and countertop convection ovens (ahem air fryers) into the public consciousness in a way no one else has. Purchased by private equity in 2017, now filing for bankruptcy.
You're probably right about big public corporations and institutional investors. But PE firms don't have the the same incentives; their incentive is often to squeeze as much ROI as possible out of the companies they purchase, consequences be damned. You're mostly right though on this part:
> Companies that sacrifice the long term for short term profits have their stocks tank and go out of business.
Or they file for chapter 11 bankruptcy and let someone else pick up the pieces, while destroying a good business and leaving a bunch of people unemployed.
Oh, that old trope that never dies. Companies that sacrifice the long term for short term profits have their stocks tank and go out of business.
Big investors are not the fools people imagine they are. About 3 milliseconds after they catch wind that a company is eating its seed corn, they dump the stock.
But if you are sure you've identified a company that is doing this, then short their stock and make a bundle.