https://pluralistic.net/2024/05/23/spineless/#invertebrates
'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:
<
https://www.sec.gov/Archives/edgar/data/940944/000092189514002031/ex991dfan14a06297125_091114.pdf>
Everyone loved this story. As David Dayen 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":
<
https://www.salon.com/2014/09/17/the_real_olive_garden_scandal_why_greedy_hedge_funders_suddenly_care_so_much_about_breadsticks/>
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):
https://en.wikipedia.org/wiki/Bust_Out
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.
*assholes
Starboard was bent on eviscerating Darden like a couple of entrail-maddened
dogs in an elk carcass:
<
https://web.archive.org/web/20051220005944/http://alumni.media.mit.edu/~solan/dogsinelk/>
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.
Dayen ends his piece with these prophetic words:
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?'
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
