We invested in a manufacturing company that consistently missed projections quarter after quarter. Management always had an explanation. The next quarter would be better. The turnaround was just around the corner. We wanted to believe it, so we waited. And we waited some more, hoping for a turnaround.
Finally, events outside of our control forced our hand. The 2008 global financial crisis hit and significantly impacted the company’s cyclical business. Customers cancelled orders in rapid fire and financing options disappeared. By the time we replaced the CEO, the damage was done, and irreversible. The company filed for Chapter 7 BK and with it came a +$20 million investment loss, BK trustee warfare and seriously pissed off LPs. One of the hardest lessons in investing and leadership is that problems rarely get smaller with time. Delaying difficult decisions often becomes the most expensive option of all.