Movie Analysis

Barbarians at the Gate is yet another movie that takes a shot at the greed present on Wall St. during the 1980’s. The movie, specifically, deals with the leveraged buyouts which became extremely popular during this decade. At the time the LBO of RJR Nabisco was the biggest LBO in history at $31.1 Billion. What struck me about the movie was the utter dis-regard the upper level management had for the actual health of the company and the emphasis that it placed on its share-holders. I understand that when a company becomes public the board of directors has a duty to make its shareholders profit, but to what extent. This movie is strikingly (although not completely the same) to (my favorite movie) Wall St. As we saw, leveraged buyouts, with a lack of regulation, can lead to stock manipulation and an insurmountable amount of debt, both of which can cripple a company. On the contrary, since the early 2000’s we have seen a tremendous amount of Private Equity firms arise and show the positive effects of leveraged buyouts especially for those companies who are not large enough to offer an initial IPO. While the movie seems to poke fun at the leverage buyouts I think the real concern is the amount of debt that these companies are allowed to take on. This is not all that uncommon from what has recently happened with tech IPO’s. Companies such as Groupon, Facebook, and Zynga have been valued too high from their IPO’s and have had a tremendous negative affect on the market. What we are seeing is that the market isn’t currently pricing in certain risks, and there has been downward pressure on these symbol’s within the last few months. I thought the movie did a great job portraying the cut throat nature of Wall St. Although things have changed since the 80’s I believe it is still the same game, with more regulation. Having said this, I don’t know if this is truly a fair depiction. Yes, New York, and Wall St. specifically is the financial capital of the world but I don’t believe pointing out a select few who exhibit this greed is completely fair.

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