Have you been sold down the digital river?

October 23, 2024 7:52 PM

It's been ten years, almost to the day, since payment processor Digital River got acquired by private equity. As of a few months ago it has stopped paying the vendors it purports to represent even though it's still been billing their customers. If you have any recurring subscriptions via that platform, now would be a good time to cancel them.
posted by flabdablet (12 comments total)

More on this from TheLayoff.com.
posted by flabdablet at 8:01 PM on October 23 [2 favorites]

Siris will finance the deal with a combination of equity and debt, for which it has secured financing.
The companies expect the deal to close in the first quarter of 2015.

the real difference between finance and finance is time travel.
posted by clavdivs at 8:53 PM on October 23 [4 favorites]

I don't have a dog in this fight, except that I think the world would be vastly improved if all private equity people were forced to work in the spam mines for the rest of their days, but I do want to note this from the Register article:

The law firm says that Digital River presently doesn't consider merchant debt claims to be valid obligations.

Merchant debt in this case is paying companies for the products they sold on their behalf and the money they collected on their behalf.
posted by Hactar at 3:07 AM on October 24 [15 favorites]

and the money they collected on their behalf

and are apparently still collecting on their behalf, despite having paid none of it to any of them since July. From the email that alerted me to this, which I got from a completely satisfactory online service I've been subscribed to for many years:

Hi there,

Unfortunately, our payment provider MyCommerce/ShareIt is going bankrupt (owing us a substantial amount of money).

They are still accepting payments and billing customers for subscriptions, which is frankly illegal, but there is not a lot we can do about that.

We are requesting that they cancel all active subscriptions, but they may not take action on this.

You may also wish to send a cancellation request email to [e-mail]

How CEO since August Barry Kasoff sleeps at night
posted by flabdablet at 4:15 AM on October 24 [8 favorites]

I’m still fuzzy on the mathematics of private equity. Their playbook seems to be:

1. Borrow a bunch of money to acquire a company
2. Suck out the value like a vampire
3. Judo-flip the debt from the acquisition onto the books of the acquired company, which will now go bankrupt and the debt discharged

Wouldn’t this leave lenders holding the bag? Why would they agree to that? What am I missing?
posted by qxntpqbbbqxl at 8:53 AM on October 24 [3 favorites]

The playbook of private equity is:

1. Buy a company with roughly 50% its own money and 50% money the company borrows to pay for its own acquisition (the debt is NEVER on the PE firm's or its clients' books)

2. Improve the company's performance

3. Pay themselves fees and dividends

4. Sell it for more than they paid for it, by M&A or IPO.

Or if #2 doesn't work ... walk away - sell for a loss or go into bankruptcy for a bigger (often total) loss of the money they put up in the first place. Private equity is only as successful as it is because that happens less often than the media would make you think.
posted by MattD at 11:31 AM on October 24 [3 favorites]

I can't help but wonder how Nvidia is taking this. At least here in the US they have been using Digital River to manage their subscriptions for GeForce Now for many years.
posted by wierdo at 1:32 PM on October 24 [1 favorite]

If you have any recurring subscriptions via that platform

These business names are unfamiliar to me but I subscribe to a LOT of things. How would I know?
posted by neuron at 9:48 AM on October 25

Isn't the knowledge that the money will never get paid back the key difference between being bad at business (legal, very, very legal) and a pyramid scheme (very illegal)
posted by wnissen at 9:55 AM on October 25

These business names are unfamiliar to me but I subscribe to a LOT of things. How would I know?

Way back in the deep mists of time, Digital River transactions would actually say "Digital River," but lately they look more like PayPal or similar and are titled "DRI*MERCHANT" where MERCHANT is the name of some company you actually intend to be doing business with.
posted by wierdo at 10:27 AM on October 25

2. Improve the company's performance

and/or

2a. Launder absurd amounts of illegal drugs and arms revenue under cover of the company's former reputation for respectability
posted by flabdablet at 7:35 PM on October 25

TLDR...what vendors are on the platform?
posted by falsedmitri at 9:58 PM on October 26