Economics and Guitar Center

[rp]

http://www.nakedcapitalism.com/2014/04/ ... onomy.html

NC is a good site BTW.

Look for them to liquidate loss leaders like their vintage collections, which exist only to give some authenticity to the stores. Might dump a whole lot of stuff on the market. Bargains? But might also make the whole vintage market go down.

[NickC]

Interesting article. Thanks for posting.

[LeftyStrat]

Thanks for sharing. If I ever had a successful company, I think I would keep it private, so the vultures couldn't take over. To easy for a public company to be forced to talk short term profits over long term health.

I've always had respect for the founder of Craigslist. He could be a billionaire if he would go public. Instead, he only makes millions, and that is enough for him. He also takes care of his employees.

[Diablo1]

Please send me an alert when GC decides to sell EVERYTHING at a deep discount.

[bradicusmaximus]

Thanks for sharing. If I ever had a successful company, I think I would keep it private, so the vultures couldn't take over. To easy for a public company to be forced to talk short term profits over long term health.

I've always had respect for the founder of Craigslist. He could be a billionaire if he would go public. Instead, he only makes millions, and that is enough for him. He also takes care of his employees.

To everything there's a tradeoff. Sometimes the trade is obvious and easily avoidable if it's negative. Other times, the trade sneaks up and is on you before you realize what happened. In many cases, decisions on funding a company are tradeoffs.

Often, a lone founder of company will recognize growth is necessary - especially if the product they produce strikes a nerve in their target market. The owner can either fund the expansion out of pocket, or take on someone else's money. Banks are never as quick to lend as we'd like and there's significant risk involved in self-funding. That leaves us chasing the equity markets. Usually, we find a nice angel investor that will give us cash for expansion in return for equity, which if we don't do just right, we find ourselves owning a part of a company that we no longer call the shots for. It does take too long or too many bad decisions before our company is in a position we never dreamed it would be in - especially when all we wanted to do in the first place was build widgets (amps, guitars, software, cars, etc.). It's very easy to theorize that you will avoid the minefield, but making all the right steps when you find yourself in one is a much different situation altogether.

Guitar Center is not going down a path that many retailers have not gone before. The difference right now is more who will profit from the demise, but the road is the same. The big thing is how they got into this position and what the market will look like when they do fail.

I think this was a good article. It will be interesting to see how it all plays out. However, I can honestly say that I won't spend too much time mourning the loss of GC when they finally go to the recycle bin of useless corporate charters.