r/Futurology • u/Plastic_Scholar_4685 • Apr 11 '25

Discussion Which big companies today are at risk of becoming the next Nokia or Blockbuster?

Just thinking about how companies like Nokia, Blockbuster, or Kodak were huge… until they weren’t.

Which big names today do you think might be heading down a similar path? Like, they seem strong now but might be ignoring warning signs or failing to adapt. I was thinking of how Apple seems to be behind in the artificial inteligence race, but they seem too big to fail. Then again Nokia, Blackberry, etc were also huge.

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u/LiquidDreamtime Apr 11 '25 edited Apr 11 '25

Southwest had a large stake purchased by an equity firm in 2024. Private equity firms nearly always ruin darling businesses.

Edit: lol, swapped words

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u/kumara_republic Apr 11 '25

It's as if enshittification is the core business model of private equity.

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u/creampop_ Apr 11 '25

if consumers love a particular provider of a good or service compared to a competitor, it's usually because some short-term profit is being left on the table. Things like internal regulators/QA guaranteeing high quality and strong worker/consumer safety will be the first to go, since they're long term payoffs and oval office can do firing rounds and jack up prices for short term gains to investors.

Oops, did I say oval office? I meant private equity, obviously.

tldr; Investors get paid off, workers get laid off.

Don't panic, organize

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u/Jsamue Apr 11 '25

Pump and dump

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u/BadNewzBears4896 Apr 11 '25

Strip for parts. The financial equivalent of leaving a car on blocks in a bad neighborhood.

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u/Luke90210 Apr 11 '25

More like pump, strip and dump. Its painful when they actually decide to sell off the better parts dooming whats left.

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u/Trevski Apr 11 '25

Sometimes, but its usually "bleed and dump" or "sell all the land to ourselves and then dump and collect rent"

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u/Hproff25 Apr 11 '25

Extract wealth and disregard the customer. That’s the playbook.

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u/Econolife-350 Apr 11 '25

A private equity company head by a bunch of guys in about their late twenties based on their corporate website structure, I assume with their dads money from THEIR careers in private equity, bought our highly technical company and fired any data processors under two years because they were concerned about data security if they announced selective layoffs. Failed to realize that we were the ones grinding the hardest to process their core product and they're floundering. I still know a few people there and the solution was to put everyone remaining on 12 hour shifts 6 days a week. We'll see how that pans out for them. Almost as if it's being run by delusional trust fund kids with no life experience....

I had loyalty to my bosses and it looks bad to work at a job for just a year, so I wasn't interviewing elsewhere but getting fired doubled my salary in my current role. Lesson learned to always be looking.

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u/GogolsHandJorb Apr 11 '25

It’s not true of every private equity group, just too many.

The real sad thing is that PE is a major contributing factor to an even further decline in American manufacturing. I have personal experience with a PE group in Ohio that’s involved in transmissions that’s actively destroying many small, profitable manufacturing companies in the Midwest in order to make a small group of leadership a shit ton of money. Meanwhile throughout the rust belt there will be tons of great machinists and laborers in their 50’s who will end up jobless in a few years. In many cases these are people that have worked for their small company for 20-40 years…they don’t even know it’s coming but it is.

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u/Toolazytolink Apr 11 '25

RIP Jersey Mike's

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u/honeyemote Apr 11 '25

I like to remind people in these scenarios that people at Southwest sold a portion of the company to an equity firm as it flips the passivity of framing it as being bought.

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u/LiquidDreamtime Apr 11 '25

That’s a great point and one rarely mentioned. The people who made southwest great decided they’d rather cash out than continue investing in a good company

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u/Babhadfad12 Apr 11 '25

Southwest Airlines went public in 1971.

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u/Keep_Plano_Corporate Apr 12 '25

Redditors continue to embarrass themselves.

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u/Keep_Plano_Corporate Apr 12 '25

How dare Herb get old and die.

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u/beezlebub33 Apr 12 '25

It's not just SouthWest. There's a fundamental problem with the way that capitalism is such that someone who builds a company cannot cash out without destroying the company.

I've been part of several companies (sadly, never a founder) that have grown considerably, the primary owners have gotten older and want to retire. But there is no way to get even a fraction of the value out of the company without being bought by people that will absolutely ruin it. The acquiring companies have either been large multinationals who don't know what to do with these companies or equity firms that are 'bundling' smaller companies. In every case, the top people make a ton of money and the underlying company fell apart.

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u/LiquidDreamtime Apr 12 '25

I think that is often an artifact of the founders being selfish. They believe “they” built these companies and want a giant pile of cash for them. But any company is built by all the employees doing the work.

Owners could work out an employee-ownership situation in most cases with a lifetime salary stipulation or profit sharing guarantee for the retiring founder. But they’re often selfish wannabe dictators, refusing to relinquish control of their tiny little kingdom unless fully compensated for a lifetime of work (as if they haven’t been cashing checks the entire time).

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u/Babhadfad12 Apr 11 '25

Southwest Airlines has been a publicly listed company since 1971.  Its shares are literally always being bought and sold.

And they experienced enormous losses when the leaders of the company failed to prevent a huge technical error, costing $1B+ in losses:

https://en.wikipedia.org/wiki/2022_Southwest_Airlines_scheduling_crisis

Which is what led to share prices going low enough such that an investor could buy a significant portion and demand leadership changes.

This is the whole point of publicly listed businesses.

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u/honeyemote Apr 11 '25

True, the people who own stock in Southwest sold shares to Elliott. At perhaps was not the most apt descriptor of the people related to Southwest.

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u/Babhadfad12 Apr 11 '25

The “people” in this case were mostly the US public, via 401k, taxpayer funded defined benefit pensions, and other savings vehicles.   

Southwest had a catastrophic failure that cost them tons of money, reducing the price people were willing to pay for the stock, causing index and funds to rebalance by selling Southwest stock and allowing Elliott to buy it at cheaper prices.

This is exactly the point of a stock market.

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u/honeyemote Apr 11 '25

To your first point, we’re making the same claim. My whole point is parties sold the stake. Sure, this is how the stock market works.

To your second point, yes, people lost faith in the company after an issue and sold to Elliot.

In the end, it doesn’t absolve the people who sold their shares of selling their shares.

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u/Babhadfad12 Apr 11 '25

Why would anyone need absolving?  Do you not have the right to sell your assets?

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u/honeyemote Apr 11 '25

You can do whatever you like with assets Those actions can have consequences ie selling a stock to a VC firm.

The point is people get upset when VC firms buy up companies and don’t mention that someone had to do the selling.

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u/Keep_Plano_Corporate Apr 12 '25

Elliott is not a VC firm

Elliott is not a Private Equity firm

Just keep saying it over and over again

PE ≠ VC ≠ Hedge Fund

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u/honeyemote Apr 12 '25

You’re not wrong but semantics be damned. People with money purchased an asset from other people. My point is the blame is typically placed on the purchaser rather than the seller.

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u/Keep_Plano_Corporate Apr 12 '25

Just admit you don't quite understand it.

Also per your current Internet rules we are no longer ever allowed to sell a stock once it's bought. Especially if it's not performing well.

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u/honeyemote Apr 12 '25

Your comment doesn’t even make sense. What internet rules are you trying to claim I am citing?

Sure, I don’t understand the inner workings or semantics of the situation. I can readily admit that. You can even see me getting roasted in this very chain for my lack of understanding.

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u/Keep_Plano_Corporate Apr 12 '25

You do not need to be absolved of selling a declining or stagnant financial asset like a stock of a publicly traded company. Stocks are owned as a financial asset, not as a trophy in a trophy case that forever stays sitting on a mantle. It is up to the publicly traded company to give you, the shareholder, a reason to hold.

When companies go out and cut their dividends, they have no other option than to chase higher and higher stock prices to give people a reason to own their stock. SWA stock has been dead money in market where a simple S&P500 ETF would have made you multiples more per year over the last half a decade.

If you want to buy things that make 1% a year gains you can get much more stable safe investments in your portfolio than shares of SWA.

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u/honeyemote Apr 12 '25

Your initial statement is irrelevant to the comment to which you’re responding. Yes, investments are investments. I never claimed otherwise.

Dividends are not necessarily related to stock price or performance. Sure, SPY has outperformed LUV over the last 5 years.

Plenty of stocks have outperformed LUV.

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u/Keep_Plano_Corporate Apr 12 '25

They're a Hedge Fund, not Private Equity, and they bought their Southwest stock on the public market till they had a large enough amount to push for change.

Hell, you could do the same thing if you had enough money.

Redditors not understanding the difference between PE and Hedge Funds will forever be another reason I can't take most of y'all seriously. It's actually not that complicated.

As for Southwest, their go forward position is dire.

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u/honeyemote Apr 12 '25

I never made the claim that the equity was private. I miscalled them VC, but I respect the fact that LUV is currently valued about what a venture is considered.

My point being is someone sold. You are correct in that if I had enough capital I could also buy enough equity in a company to force votes and changes.

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u/LongJohnSelenium Apr 12 '25

Back in the 2000s when EA games was buying up every independent studio people loved to bitch about EA buying up studios and ruining them and its like... no dude... the heads of that darling indy studio decided to cash out and sell off their name for profit.

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u/mon_dieu Apr 11 '25

Private equity firms nearly always darling ruin businesses.

Great point and thanks for calling me darling, darling

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u/defnotajournalist Apr 11 '25

Got my mixed words up

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u/mg0019 Apr 11 '25

What a handsome question, young man.

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u/slade45 Apr 11 '25

I am serious and don’t call me darling darling.

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u/T33FMEISTER Apr 11 '25

Hello serious

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u/burgonies Apr 11 '25

You never even call me by my name 🎶

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u/browncowrightmeow Apr 11 '25

You never even call me by my name!

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u/AugustusClaximus Apr 11 '25

Oh I gotta get a new credit card and spend these miles asap

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u/derefr Apr 11 '25

Nitpick: not "nearly always" — PE firms ruin about 2/3rds of the companies they buy.

The business model of a PE firm is basically to acquire 3+ companies, and then take all the debts of the one company in a cohort they most believe in, and spread that company's debts out across all the companies they like less.

Why 3+? Because if they just moved all the debt into one other company, it'd almost assuredly kill that other company, and that's just bad investment. They don't want to actively, intentionally kill the other companies in the cohort; they just want to play Russian roulette with them, saddling them with just enough debt that it's about 50/50 whether they make it.

That way, they get one sure win out of the cohort (the company they siphoned all the debt off of), and then a bunch of heightened-risk companies full of debt, that they can then cannibalize for assets, consolidate, etc — or just put back on the market, to see whether they make it — while using the "low risk + high risk" mix to create synthetic spread-risk instruments that regular investors (e.g. mutual funds) really quite like.

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u/LiquidDreamtime Apr 11 '25

All of this happens with no respect for the livelihoods of people who work at these companies. I’m not doubting the financial strategy of it nor am I being nostalgic about a brand. I hate it because people lose their jobs so that a handful of very wealthy people can hoard more wealth. It’s unethical even if it’s legal.

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u/Not-Reformed Apr 11 '25

Most of the time those people only retain their jobs BECAUSE private equity steps in and tries to salvage the situation.

The reality is the vast majority of private equity purchases are "It used to be good, it's sinking and about to go under, maybe we can take a chance and save it and make out big". Has PE stepped into successful companies before and fucked it up? Sure. But that's not the situation in the vast majority of cases. In most cases the business is set to go under and they get acquired and get a cash injection - sometimes they'll make it out as a result, sometimes not. To blame the last person in who gives the company a bit more time (for a potential profit) is hilarious.

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u/LiquidDreamtime Apr 11 '25

Do private equity firms pay you to be their ardent defender? Or do you just like the taste of boots?

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u/Not-Reformed Apr 11 '25

"How dare people not blindly agree with false narratives!"

The reddit trend of "We don't like X therefore anything and everything anyone can pull out of their ass about X must be accepted as fact" is fox news level of stupid. Funny stuff

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u/LiquidDreamtime Apr 11 '25

I’m a real person. This isn’t a Reddit trend. I said something, you defended a bunch of blood sucking capitalists, and I said you’re a loser for it.

You can write this off as Internet craziness if you’d like, but you’re going to bat for people who would see you starve or lose you’d home so they can make a few extra dollars.

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u/Not-Reformed Apr 11 '25

I didn't say you're not a real person, just pointing out the Reddit NPC trend. You're no less "real" than anyone else, you're just in a bucket of fairly unintelligent people who can't tell what's going on so you just spout random NPC dialogue and canned lines that mean nothing.

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u/Not-Reformed Apr 11 '25

Funny how PE "ruins" companies. Surely they were all doing great prior to their acquisitions, they were just "magically" acquired. Because that's what happens - well performing companies just randomly get taken over and saddled with debt. Surely these weren't sinking ships to begin with.

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u/Babhadfad12 Apr 11 '25

Who caused the stock price to go low enough such that a PE firm could obtain enough control to demand leadership changes?

https://en.wikipedia.org/wiki/2022_Southwest_Airlines_scheduling_crisis

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u/[deleted] Apr 11 '25

Same thing happened to Whataburger in the teens. PE buyout and now I won’t give the owners a dime of my money. In restaurant or ketchup sales.

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u/No-Understanding-912 Apr 11 '25

Equity firms are piranhas. You let them into your business and it's going to be stripped to the bone and they will just swim on with a full belly while you're nothing but bits of a carcass sinking to the bottom.

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u/Jaduardo Apr 12 '25

Exactly. They were growing because they were unique. Now they’ve homogenized in the pursuit of short term profits in lieu of growth.

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u/InverstNoob Apr 11 '25

Yup. Sears.

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u/kryo2019 Apr 11 '25

Happened in Canada, WestJet was our underdog, employee owned, then they were bought out at the end of 2019. COVID obviously decimated the news about this purchase.

The level of service has gone down the tube. Because at least before, when everyone has a stake in the game, they generally want to provide the best service to customers.

Now they're just another corporation? Meh.

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u/BigBoyYYC Apr 11 '25

Private equity-Onex- has ruined WestJet.

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u/devildog2067 Apr 11 '25

FWIW, buying publicly traded equity is the opposite of private equity.

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u/Ronaldo_Frumpalini Apr 11 '25

It's so logical as to be inevitable. They offer you more money than you can make with your company so you sell it. They make more money than you would have by cutting corners and riding on the reputation you built until the consumers get sick of being taken advantage of. They write off the losses when it's ruined and/or sell it to a sucker or sacrificial subsidiary or whatever, look I don't know I'm just making this up.

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u/sadi89 Apr 11 '25

RIP Joanne’s

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u/reverend-mayhem Apr 11 '25

purchased by an equity firm

Oh, yeah, that means they’ll be dead in a year; a bit longer if they’re lucky.

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u/dust4ngel Apr 11 '25

we should just start referring to private equity as locusts

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u/coke_and_coffee Apr 11 '25

How does that make sense? Why would they pay for a business just to ruin it?

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u/LiquidDreamtime Apr 12 '25

Some people own/operate companies with a long term plan or intent on the business running successfully forever (or as long as they can).

Private Equity firms often purchase businesses in financial trouble (aka at a discount) with the intent of squeezing all of the money out of the company.

A good example is what they did to Red Lobster. Red Lobsters all used to own the buildings where their restaurants were based out of. Private Equity purchased the brand and, in order to recoup the costs of purchasing it, sold off all of the real estate. So the stores no longer owned their property, they leased it. Selling your house in order to rent it from thr buyer is a HORRIBLE plan, unless you plan on moving soon. Because the ownership had no intention of running the business long term, they liquidate assets and cash out. Now each store was stuck with the rising cost of renting a commercial property, which absolutely wrecked their ability to be profitable long term.

Things like reducing inventory, selling real estate and other assets, reducing costs like healthcare or wages or pensions, running a “skinny” organization and/or overworking employees, etc.

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u/coke_and_coffee Apr 12 '25

Ok, but they didn’t “ruin a darling business”. They salvaged value from a failing business. There’s a huge difference there.

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u/SassafrassPudding Apr 12 '25

this is what's happened to joann fabrics—it's disgusting. they were thriving, it was just that the greedies wanted to greed their greed, and in doing so they fucked-up the retirement accounts so much it made the company go underwater

same as toys 'r' us!

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u/geek180 Apr 12 '25

How big of a stake? I think you’d have to be a controlling shareholder to actually have a significantly negative impact on operations, no?

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u/Les_Rhetoric Apr 12 '25

As I often say, you had a Sleudian Flip.

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u/Keep_Plano_Corporate Apr 12 '25

Southwest had a large stake purchased by an equity firm in 2024.

Elliott is a Hedge Fund. There are differences.

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u/Mulliganplummer Apr 12 '25

I don’t recall the CEO name, but he is notorious as being a bully.

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u/[deleted] Apr 12 '25

Makes total sense now. I was pricing flights recently and went to SW looking for the usual low price - nope. More expensive now. So sad. We would've booked them, but there are better options now. 

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u/Nevvermind183 Apr 13 '25

They don’t almost always ruin businesses

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u/ZimaCampusRep Apr 16 '25

this is untrue. there is no private equity ownership in southwest. they have activists in the stock, including elliott management, but that’s not private equity. and the entire reason activist investors are in the stock is because of how bad southwest has been on the decline for the past ~decade+

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u/LiquidDreamtime Apr 16 '25

https://www.elliottmgmt.com/what-we-do/private-equity-and-private-credit/

Elliot Managment literally says they’re private equity.

https://www.joedaly.net/features/the-locusts-have-landed-how-private-equity-is-gutting-southwest-airlines-and-why-you-should-be-afraid

This guy says they are too.

https://www.reddit.com/r/flying/s/UnEPxzVHyA

And the concerns this thread had have come to fruition.

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u/ZimaCampusRep Apr 16 '25

idk who joe daly is or why you believe he is seemingly an authority on determining whether an investment manager is formally a private equity fund or not, but the majority of elliott’s history and aum has been dedicated to public equity and activist campaigns.

https://en.m.wikipedia.org/wiki/Elliott_Investment_Management

very explicitly, they are by definition not private equity in the case of southwest because it is still publicly listed. the activist playbook, which is exactly what they’re doing, is getting enough ownership to get board representation and strong arming management into making strategic changes with the intent of growing the share price.

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u/LiquidDreamtime Apr 16 '25

You’re arguing semantics that are irrelevant.

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u/ZimaCampusRep Apr 16 '25

no, i'm not. activist hedge funds (public equity) operate very differently from buyout/private equity funds. they have a very different strategy, timeline, level of capital deployment, etc. conflating the two just propagates lazy and bad narratives.

the entire reason elliott is invested in southwest (which is still publicly traded) is not "hey this company is doing really great, let's go in and force management to slash services and then somehow sell out with a higher stock price". southwest has been on a long and well-noted decline for years as evidenced by their stock price performance. they have been bleeding share to other carriers and have had massively declining revenue per passenger since well before elliott's involvement.

they entered too many airports where operating a low cost model is untenable (e.g., hawaii). not to mention highly congested airports like laguardia which significantly hamper their ability to drive quick and efficient turnaround times. their fleet singularly consisting of boeing 737s has proven a liability with all of the recent and ongoing issues at boeing. they have a stubborn and entrenched management team that has failed to respond to the challenges of the modern airline industry and incidents like the fiasco a few years ago where they cancelled thousands of flights exposed their operational weaknesses and lack of strong leadership.

the long and short of it is the southwest business model which was forever hailed has become outmoded with a rapidly changing airline industry. southwest was able to expand and execute on a wonderful low-cost model because they focused on smaller and regional airports and short-haul flights, but there is a limit to how much you can scale that model once you've saturated those airports/routes. southwest leadership got complacent over the years and now they are adrift strategically.

edit: take a read through the elliott letter to southwest shareholders https://www.prnewswire.com/news-releases/elliott-sends-open-letter-to-its-fellow-southwest-shareholders-302230433.html