Thread by @PitchforkEcon

You may have read that Instant Brands, the company behind the Instant Pot and Pyrex filed for bankruptcy.

How can a business that manufactures two of the most successful cooking brands in the world fail so badly that it winds up going bankrupt? (THREAD)

The villain in this story is a familiar one: Private equity.

“Instant Brands is majority owned by Cornell Capital, a New York-based private-equity firm that engineered the 2019 merger after initially purchasing locally based World Kitchen, the Pyrex and CorningWare company, in 2017” chicagobusiness.com/finance-bankin…

Once Cornell Capital bought in, they immediately started sucking all the profits out of the businesses and away to wealthy investors — instead of investing in the future of the businesses, raising wages, or cutting costs for consumers.

Americans bought lots of Instant Brands products when they took to their kitchens during lockdowns in the early days of the pandemic, and Cornell decided to take a big loan against all that new revenue and pay it out directly to shareholders.

According to filings, Instant Brands took on a $450 million term loan. That debt refinanced $294 million in existing debt and helped support a $245 million dividend to shareholders. yahoo.com/now/instant-br…

This is classic private equity behavior. Private equity pulls money away from profitable companies and toward the wealthy shareholder class, and then saddles the company with an enormous amount of insurmountable debt.

Finally, once all available short-term value has been sucked out of a company, private equity firms sell off its remaining husk for scraps.

It’s unlikely that Instant Pots and Pyrex cookware will disappear from American kitchens in the long term. Some other corporation will likely scoop up the remains of the two valuable brands for pennies on the dollar.

It’s possible that they’ll become zombie brands, resurrected in a cheap and shoddy manner to take advantage of known and beloved names.

Private equity has destroyed many other longstanding companies using this exact playbook — Toys R Us, Sears, and Payless Shoes among them.

.@ewarren has called this “legalized looting — looting that makes a handful of Wall Street managers very rich while costing thousands of people their jobs, putting valuable companies out of business, and hurting communities across the country.” vox.com/the-goods/2019…

Until our leaders enact policy change, private equity firms will continue to avoid risk and accountability by driving companies into the ground and laying off workers in exchange for a quick payday.

For more, listen to our “Pirate Equity” episode with Jim Baker of @PEstakeholder pitchforkeconomics.com/episode/pirate…