Our monthly "Gibson in Imploding" article.

@reverend1

This one.... So sweet.

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The pricing at Gibson has gotten a little nuts. Some of the historic LPs are creeping up on 10 grand. I fall into their blues lawyer/rock dentist demographic, but 10K is just too much for me to even consider a realistic price on a guitar. I'm not sure who they are building these things for anymore. It has to be a very small number of people that look at a LP with a street price of 10K and say, "yep, I'll take it".
 
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I post about this every so often, but I'm fairly sure that Gibson's difficulties aren't as related to the core business as they are to their debt burden.

Leaders of companies that are otherwise doing fine get greedy and borrow a ton of money, and pay themselves off. They also pay off the lender via transaction fees. Up front. It's nothing more than looting the till, and yet: lack of political awareness means eyes gloss over, and people don't object.

The analogy I make is imagine you are halfway through your mortgage. Make your payments on time, things going fine. But fuck that, you wanna live large! So, you borrow the entire value of your house using your house as collateral. As cash - and you spend that cash. On, among other things, a new (smaller) home. When you can't make the payments, you shrug, and go off to live in the new house, telling your original mortgage holder and the new one to fight it out over what's left.

There are laws against individuals doing this. But not corporate executives.
 
Danhedonia said:
I post about this every so often, but I'm fairly sure that Gibson's difficulties aren't as related to the core business as they are to their debt burden.

Leaders of companies that are otherwise doing fine get greedy and borrow a ton of money, and pay themselves off. They also pay off the lender via transaction fees. Up front. It's nothing more than looting the till, and yet: lack of political awareness means eyes gloss over, and people don't object.

The analogy I make is imagine you are halfway through your mortgage. Make your payments on time, things going fine. But fuck that, you wanna live large! So, you borrow the entire value of your house using your house as collateral. As cash - and you spend that cash. On, among other things, a new (smaller) home. When you can't make the payments, you shrug, and go off to live in the new house, telling your original mortgage holder and the new one to fight it out over what's left.

There are laws against individuals doing this. But not corporate executives.
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I believe Gibson’s debt is related to the purchase of all of these other business they have bought. I’ll ignore the corporate executive babble.

At the end of the day they still have gross sales in excess of 1 billion dollars. Say what you want about Henry he bought the company for something like 5 million and now cash flows $1,000,000,000.00. I have no doubt the debt will get restructured and Henry will remain at the helm for the foreseeable future. They might sell off some of the electronics companies they’ve bought. Let some people go but I doubt we will see anything significant happen.
 
What is "babble?" Leveraged debt is at the discretion of the lender - who gets paid (kickback is the better word) for loaning the money. In most cases, there are indeed ostensible business reasons for the loan, along with the fees and "one time payments" to board members, c-level execs, etc.

When hubris strikes hard, the payouts are larger and more obvious.

Henry may be a difficult personality, but you are correct that he has grown the top line. That's a success that should be recognized. It's also worth paying attention to when an executive plunges a company into a bad debt situation and there are consequences, that also should be recognized. When that negative result comes about from exploiting corporate loopholes and self-serving greed, I think that's more than 'things didn't work out.' YMMV.
 
Danhedonia said:
What is "babble?" Leveraged debt is at the discretion of the lender - who gets paid (kickback is the better word) for loaning the money. In most cases, there are indeed ostensible business reasons for the loan, along with the fees and "one time payments" to board members, c-level execs, etc.

When hubris strikes hard, the payouts are larger and more obvious.

Henry may be a difficult personality, but you are correct that he has grown the top line. That's a success that should be recognized. It's also worth paying attention to when an executive plunges a company into a bad debt situation and there are consequences, that also should be recognized. When that negative result comes about from exploiting corporate loopholes and self-serving greed, I think that's more than 'things didn't work out.' YMMV.
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The current debt issue has nothing to do with any monies they my or may not have taken for themselves. If they did take any monies it certainly is an drop in a bucket compared to the overall amount at issue. It's a private company owned by Henry and he can do with it what he wants. It's none of our business. I have no reason or evidence to start throwing around accusations of greed (whatever the fuck that means) or anything else, so why bother. I have had enough of the juvenile and ridiculous position that all business people are evil and greedy. Things can go wrong with no malfeasance or intended malice. To start throwing around those type of accusations is ridiculous unless you have some evidence to support it. Which to my knowledge there is none.

If you don't like the guy, fine. You disagree with what he has done, fine. You think he has made dumb decisions, fine. Many agree. There is no such thing as a loop hole. It's the law as written.

Why not stick to fact rather than throw around baseless accusations?
 
Tiltsta said:
The pricing at Gibson has gotten a little nuts. Some of the historic LPs are creeping up on 10 grand. I fall into their blues lawyer/rock dentist demographic, but 10K is just too much for me to even consider a realistic price on a guitar. I'm not sure who they are building these things for anymore. It has to be a very small number of people that look at a LP with a street price of 10K and say, "yep, I'll take it".
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I worked as management at two Bain-funded startups. One of them I was with for some time, first we did an IPO, then took ourselves private, and finally got acquired. With the other it was a straight venture leading to a sale.

My accusations don't have the benefit of Gibson's balance sheet, but I do certainly know corporate finance. Do you have anything specific to cite? I'm going by what is reported in the financial press. When you leverage your company to make a string of acquisitions and then sell them off, at a discount, rapidly, it's indeed malfeasance. And I'm very sure that the people who funded this escapade were paid and paid well.

If you would like more specific examples with actual figures, I'm happy to provide them.
 
Let me address the "certainly a drop in the bucket." At one company with which I am familiar, the CEO obtained $400M in funding, and the VCs were paid $32M and he paid himself $40M.

I will leave it to you if you find 72/400 significant or not.
 
Danhedonia said:
I worked as management at two Bain-funded startups. One of them I was with for some time, first we did an IPO, then took ourselves private, and finally got acquired. With the other it was a straight venture leading to a sale.

My accusations don't have the benefit of Gibson's balance sheet, but I do certainly know corporate finance. Do you have anything specific to cite? I'm going by what is reported in the financial press. When you leverage your company to make a string of acquisitions and then sell them off, at a discount, rapidly, it's indeed malfeasance. And I'm very sure that the people who funded this escapade were paid and paid well.

If you would like more specific examples with actual figures, I'm happy to provide them.
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Sure, detail the amounts of the payments Henery and his team took. Even if they did who cares?
 
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