This is what is going on with Jagex. Read it and weep!
"the standard private equity model, and it represents most of what an equity capital investor does, is to find a company with predictable cash flows, low debt and high taxes. They purchase the company from the existing owners, public or private, give the management a 10 - 20% ownership, leverage (borrow from the banks on the equity they now have in the company) the equity capital they invest with debt at 3-5 times the equity, grow the business and sell it or take it public for a higher value than they purchased it. What leverage can do is significantly increase the return on equity. If BC buys a company for $400 million, invests $100 million and borrows $300 million and the company value increases to $500 million BC has earned 100% on its equity investment even though the company's value only increased by 25%. That model does not need any fancy tax planning to generate long term capital gains for both the investors and investment managers.
For people in the USA, this represents what "guess who" was doing to get so filthy rich! If the Company can't generate the income to continue to operate because the company owes way more than the company is now worth even though the investors have taken out all they borrowed to stuff in their own pockets -- the company goes bankrupt, workers lose their jobs, pensions and healthcare while the equity investors walk away with millions they took out of the company.
Bottom line is Investors do NOT care about you. They care about getting enough money out of Jagex to fill their pockets with millions and if Runescape goes down, oh well, they are filthy rich and are on the French Rivera talking about what noobs spoiled kids are as well as parents who give them money to spend on Runecoins etc.
21-Aug-2012 17:23:42