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Vulture capitalist

Not to be confused with vulture fund.

Vulture capitalists are investors that acquire distressed firms in the hopes of making them more profitable so as to ultimately sell them for a profit. Due to their aggressive investing nature, and the methods they use to make firms more profitable, vulture capitalists are often criticized.

Contents

A venture capitalist is an investor who provides funding for start-ups, early stage firms and companies with growth potential. These types of firms seek out venture capitalists, as they are too small or too new to have credit profiles, making them ineligible for bank loans and other forms of raising capital.

Although risky, venture capitalists invest in firms as there are very lucrative returns on their investments when the company they are investing in is successful. Furthermore, venture capitalists will often invest in a range of firms rather than just one or two, in order to mitigate risks if the investments are unsuccessful.

On the other hand, vulture capitalists provide a final attempt at gaining funding. Whereas venture capitalists seek firms with growth potential, vulture capitalists usually seek out firms where costs can be cut in order to increase profits. Mostly, these firms are distressed and on the brink of bankruptcy. Due to this reason, vulture capitalists are able to buy these firms at a much lower price than if they had been profitable and expanding.

Once the firm is acquired, vulture capitalists can attempt to increase efficiency in order to turn the company around. This is often done by cut-downs costs wherever possible, which in part is likely to be accomplished by firing workers where possible, reducing benefits or both, which increases profits or the likelihood of future profitability, thus raising the share price and the worth of the investors holdings. Lastly, the vulture capitalists sell any equity they own, making a profit. But vulture capitalists can also choose to divide and sell off the entire company in pieces, if this should increase the attractiveness of each individual piece to its purchaser and thus allow the vulture capitalist a net profit.

Vulture capitalists receive a lot of criticism as they often go for firms that are in very poor shape, meaning these firms are unable to secure capital from banks or even venture capitalists as they are too risky an investment. Due to this, vulture capitalists are able to acquire the firms for prices that are often very low considering what they would have been if the company was not currently under pressure, or if other participants were bidding on it.

Once vulture capitalists acquire a firm, they often fire workers to reduce costs, in order to raise profitability for their own gain. Vulture capitalists are criticized for this, especially as the newly unemployed people can be said to put pressure on the political economy and general society through their need of unemployment benefits, which comes from company payroll taxes and other taxpayers.[unreliable source?][better source needed]

For the same reasons, venture capitalists can be accused of being vulture capitalists, or "vulture" for short, depending on how they conduct their business. In this sense, vulture capitalist is used as a derogatory word for venture capitalists, as the vulture capitalists are considered to be preying on firms in distress for their own profit.

  1. "Definition of Vulture Capitalist". Investopedia.com. Investopedia. Retrieved16 October 2014.
  2. Evans, Denise; Evans, William (2007).The Complete Real Estate Encyclopedia. The McGraw-Hill Companies, Inc. p. 434.
  3. Hendricks, Drew. "The 5 Best Ways To Raise Capital". Forbes. Retrieved16 October 2014.
  4. Lund, Marcie. "Venture vs. Vulture Capitalists". missionwealth.com. Mission Wealth. Retrieved16 October 2014.
  5. Feld, Brad. "How Do VCs Mitigate Risk In Their Investment Portfolios?". AsktheVC.com. AskTheVC. Retrieved16 October 2014.
  6. "How Did Mitt Romney Get So Rich?". YouTube.com. YouTube. Retrieved16 October 2014.
  7. "DEFINITION of 'Vulture Capitalist'". Investopedia. Retrieved23 July 2016.
  8. "Vulture Capitalist". Financial-Dictionary.com. The Free Dictionary. Retrieved17 October 2014.

Vulture capitalist
Vulture capitalist Language Watch Edit Not to be confused with vulture fund Vulture capitalists are investors that acquire distressed firms in the hopes of making them more profitable so as to ultimately sell them for a profit 1 Due to their aggressive investing nature and the methods they use to make firms more profitable vulture capitalists are often criticized 2 Contents 1 Distinguishing between venture and vulture capitalists 2 Criticism 3 See also 4 ReferencesDistinguishing between venture and vulture capitalists EditA venture capitalist is an investor who provides funding for start ups early stage firms and companies with growth potential 1 These types of firms seek out venture capitalists as they are too small or too new to have credit profiles making them ineligible for bank loans and other forms of raising capital 3 Although risky venture capitalists invest in firms as there are very lucrative returns on their investments when the company they are investing in is successful 1 4 Furthermore venture capitalists will often invest in a range of firms rather than just one or two in order to mitigate risks if the investments are unsuccessful 5 On the other hand vulture capitalists provide a final attempt at gaining funding 4 Whereas venture capitalists seek firms with growth potential 1 vulture capitalists usually seek out firms where costs can be cut in order to increase profits Mostly these firms are distressed and on the brink of bankruptcy 4 Due to this reason vulture capitalists are able to buy these firms at a much lower price than if they had been profitable and expanding 4 Once the firm is acquired vulture capitalists can attempt to increase efficiency in order to turn the company around This is often done by cut downs costs wherever possible which in part is likely to be accomplished by firing workers where possible reducing benefits or both which increases profits or the likelihood of future profitability thus raising the share price and the worth of the investors holdings Lastly the vulture capitalists sell any equity they own making a profit But vulture capitalists can also choose to divide and sell off the entire company in pieces if this should increase the attractiveness of each individual piece to its purchaser and thus allow the vulture capitalist a net profit 6 7 Criticism EditVulture capitalists receive a lot of criticism as they often go for firms that are in very poor shape 4 meaning these firms are unable to secure capital from banks or even venture capitalists as they are too risky an investment 3 Due to this vulture capitalists are able to acquire the firms for prices that are often very low considering what they would have been if the company was not currently under pressure or if other participants were bidding on it 4 Once vulture capitalists acquire a firm they often fire workers to reduce costs 6 in order to raise profitability for their own gain Vulture capitalists are criticized for this especially as the newly unemployed people can be said to put pressure on the political economy and general society through their need of unemployment benefits which comes from company payroll taxes and other taxpayers 6 unreliable source better source needed For the same reasons venture capitalists can be accused of being vulture capitalists or vulture for short depending on how they conduct their business 8 In this sense vulture capitalist is used as a derogatory word for venture capitalists as the vulture capitalists are considered to be preying on firms in distress for their own profit 2 See also EditAsset stripping Leveraged buyout Private equity Steve Mnuchin Mitt Romney Paul Singer George SorosReferences Edit a b c d Definition of Vulture Capitalist Investopedia com Investopedia Retrieved 16 October 2014 a b Evans Denise Evans William 2007 The Complete Real Estate Encyclopedia The McGraw Hill Companies Inc p 434 a b Hendricks Drew The 5 Best Ways To Raise Capital Forbes Retrieved 16 October 2014 a b c d e f Lund Marcie Venture vs Vulture Capitalists missionwealth com Mission Wealth Retrieved 16 October 2014 Feld Brad How Do VCs Mitigate Risk In Their Investment Portfolios AsktheVC com AskTheVC Retrieved 16 October 2014 a b c How Did Mitt Romney Get So Rich YouTube com YouTube Retrieved 16 October 2014 DEFINITION of Vulture Capitalist Investopedia Retrieved 23 July 2016 Vulture Capitalist Financial Dictionary com The Free Dictionary Retrieved 17 October 2014 Retrieved from https en wikipedia org w index php title Vulture capitalist amp oldid 1007184530, wikipedia, wiki, book,

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