First Round: Like a complete unknown

Once upon a time Rolling Stone used to be a music magazine. But these days it also dabbles a bit in business and finance, notably with its famous ‘vampire squid wrapped around the face of humanity’ evisceration of Goldman Sachs in 2010.

Now it has trained its guns on private equity. In a hatchet job entitled “Why Private Equity Firms Like Bain Really Are the Worst of Capitalism”, writer Josh Kosman explains why Mitt Romney has no right to portray his private equity career as a qualification for high office, on the grounds that buyout firms sack workers, send companies bankrupt and sacrifice small children (we’re paraphrasing with that last bit).

First Round’s eyebrows perhaps rose highest when reading this interesting definition of leverage, included in the early part of the article: “‘Leverage’ refers to the fact that the company being purchased is forced to pay for about 70 percent of its own acquisition, by taking out loans. If this sounds like an odd arrangement, that’s because it is. Imagine a homebuyer purchasing a house and making the bank responsible for repaying its own loan, and you start to get the picture.”

Now Kosman – author of ‘The Buyout of America: How Private Equity Is Destroying Jobs and Killing The American Economy’ – is clearly no fan of the asset class.  And First Round is loath to accuse any other media outlet of sloppiness and inaccuracy (which remain the two principal hallmarks of its own journalism). But that’s just nonsense, isn’t it?

About the kindest conclusion here is that the industry needs to redouble its comms efforts. And that we now have a much better insight into why the Economist doesn’t review CDs.