Editing Asset stripping (section)

{{Short description|Selling assets for the sake of equity investors}}
{{Multiple issues|
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'''Asset stripping''' refers to selling off a company's [[asset]]s to improve returns for equity investors, often a financial investor, a "[[corporate raid]]er", who [[takeover|takes over]] another company and then auctions off the acquired company's assets.<ref>{{cite web|url=http://financial-dictionary.thefreedictionary.com/Asset-stripping|title=Asset Stripping|publisher=HarperCollins|access-date=30 October 2014}}</ref> The term is generally used in a [[pejorative]] sense as such activity is not considered helpful to the company.

The proceeds of the sale of assets may be used to lower the company's net debt. Alternatively, they may be used to pay a dividend to equityholders, leaving the company with lower [[net worth]] – i.e. the same level of debt but fewer assets (and weaker earnings) to support that debt. With a lower level of assets, some argue that the business is rendered less financially stable or viable.  For example, the [[sale-and-leaseback]] of a building would lead to an increased rental bill for the company.

Asset stripping is a highly controversial topic within the financial world. The benefits of asset stripping generally go to the corporate raiders, who can slash the debts they may have whilst improving their net worth.<ref>{{cite web|url=http://www.economicshelp.org/blog/glossary/asset-stripping/|title=Asset Stripping|last1=Pettinger|first1=Tejvan|access-date=30 October 2014}}</ref> 
However, since asset stripping often results in thousands of employees losing their jobs without much consideration of the consequences to the affected community, the concept can be unpopular in the public sphere. One particular example of where asset stripping cost a significant number of workers their jobs was in the [[Fontainebleau Resort Las Vegas|Fontainebleau Las Vegas LLC]] case.<ref>{{cite web|url=http://www.reviewjournal.com/business/economy/removal-fontainebleau-s-construction-crane-signals-doom-ill-fated-strip-hotel|title=Removal of Fontainebleau's construction crane signals doom for ill-fated Strip hotel|last1=Stutz|first1=Howard|publisher=Stephens Media LLC|access-date=30 October 2014}}</ref> After the takeover, 433 people lost their jobs when assets were sold off and the company was stripped.

Asset stripping has been considered to be a problem in economies such the [[United Kingdom]],<ref>{{Cite web |title=Asset strippers are preparing to feast on Britain's COVID-ravaged economy |url=https://www.opendemocracy.net/en/oureconomy/morrisons-private-equity-asset-strippers-preparing-to-feast-on-britains-covid-ravaged-economy/ |access-date=2023-02-02 |website=openDemocracy |language=en}}</ref> and the [[United States]], which have highly financialized economies. In these situations, finance capital focusses on shareholder returns, sometimes at the expense of the viability of bought out companies.