Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.
Because the company then had to pay off those extreme loans, they were forced to sell off their assets and property, which they leased back from the very private equity firms that now owned them.
The same thing happened more recently with Red Lobster and JoAnn Fabrics.
The banks can also technically short the stock as well once the buyout was public, knowing how shit the deal was they can make money on the downside at the expense of all the pensions, 401ks etc that had initially bought the stock. There also isnt a limit that prevents shorting the stock more than shares are in existence. Hence why the gamestop situation was close to breaking the whole stock market a few years back when they started turning everything around for the companies bottom line. With the stock now able to make it think a bout a billion more shares over time the out for the short side has been sort of given without completely nuking the market. But as when the shares are diluted is up to the board it allows gamestop to take advantage of the short side to create more cash on hand for themselves threw timing their market offerings to coincide with when swaps that are housing those shorts come due. In the toys r us case the executives and board were happy to take their golden parachute from the buyout and let ordinary people’s pensions and 401ks carry the bag for them in the form of the stock going to zero and eventually being delisted from the market.
Not sure this applies here as it was a private buyout meaning that there would be no stock to short.
They could have shorted it before the buyout to get a better deal, but the banks didn’t buy it the just lent the money.
Also shorting before could be seen as insider trading, right? Not that something being illegal means it wouldn’t happen, but feels like that would be hard to hide.