[udia]

Instant Pot died primarily due to private equity greed, not because of Instant Pot reliability.

In 2017, Cornell Capital bought the company for a total $500M of which $300M was financed by debt. Then 4 years later in 2021, it refinanced and added on debt, bringing the total debt to $535M. $245M was immediately paid out to shareholders as a dividend. Cornell Capital got paid back all the cash it invested in the company's acquisition, and then some. In 2023 due to high interest rates the company was no longer able to service its debt, costing the company ~$50M a year, and the company had to file Chapter 11.

[hotnfresh]

What are the magic words these people use to get a bank to give them millions of dollars, let them walk off with it, then eat the loss?

[voisin]

The debt likely wasn’t a normal bank, and the interest rate was likely quite high. The parties making the loan were likely fully aware of the risk and thought the interest rate appropriate compensation.

[teo_zero]

Are those banks the same that failed to recognize what a bad idea it was to bet on sub-prime loans before 2009?

[IAmNotACellist]

Those WERE a great idea--as long as you weren't the one caught holding the bag

[chongli]

What I don’t get is why we don’t consider it fraud to knowingly take a loan you have no intention of paying back.

[gruez]

1. It is fraud

2. Is there any evidence that's ever the case from PE firms? Startups fail all the time, but I wouldn't characterize them as "knowingly take a loan you have no intention of paying back"

[refurb]

It's call "high risk debt". The high interest rate offsets the likelihood of default.

[sytelus]

Wow... I have heard this story so many times. Question is how do you get $300M debt which probably everyone involved knew that it would be written off in short order?

[fuzzfactor]

When big money changes hands, at least one person on each end gets a bonus of some kind.

When it's $300 million the bonuses can be kind of sizable, so everyone else including the shareholders, be damned.

The shareholders don't find out until it's too late.

[thomasahle]

Any chance of the lenders reclaiming some of that dividend money? Or was it paid out too long before the bankruptcy?