7 ms·
There are many major American companies that will be bankrupt in a few months if quarantine continues. No business projects revenue dropping by almost 100% ove
by nostromo 7y ago
There are many major American companies that will be bankrupt in a few months if quarantine continues.
No business projects revenue dropping by almost 100% overnight.
- deleted 7y ago[deleted]
- cycrutchfield 7y agoEspecially because a lot of those major American companies have spent the past decade loading up on debt and buying back their shares at historically high prices.
- Alex3917 7y agoIsn't a stock buyback exactly the same as paying a dividend, but taxed at a lower rate? I don't see why these companies are being demonized, the government should just let them go bankrupt and let the public buy their assets for pennies on the dollar.
- untog 7y ago> I don't see why these companies are being demonized, the government should just let them go bankrupt Well, they’re being demonised because they’re pushing heavily for a government bailout that will avoid them going bankrupt.
- twblalock 7y agoThey only need the bailout from the government because the government forced businesses to shut down. How exactly is that the business's fault?
- StanislavPetrov 7y agoThey are being demonized because the government isn't letting them go bankrupt or letting the public buy up their assets. Instead the government is rewarding their greed and poor business practices by bailing them out and letting them keep all of the money they made.
- HenryBemis 7y ago> ..bailing them.. Because some people may not realize/forget the source of these billions, these billions are either taxpayer money, OR these are new/fresh money (which means diluting the value of the currency for everyone).
- Ericson2314 7y agoYes to all that. No tears, no bailout. Nationalize out of bankruptcy instead. Do note that the buybacks last time were enabled by government loans. So that is a bit suspect on the governments part for not leveraging the power they did have. But yes overall these silly critiques of strawmen I think just diffuse anger that should be directed at real things. No good.
- nutjob2 7y agoThe problem is when they all do it it becomes systemic risk. The new meta is "if we all do the same stupid shit we'll get bailed out when the crunch comes" The penalty for a bailout should be bankruptcy and nationalization. Taxpayers should profit, not lose.
- idoubtit 7y agoThat's not the way it works. For instance, over the last 10 years, Boeing spent 45 B$ in buyback out of its 60 B$ profit. Now that the situation looks grim, Boeing does not have enough cash to live through the crisis. But it won't go bankrupt, it will get 60 B$ of cash from today's federal government bill, and probably more later on.
- lotsofpulp 7y agoWhat would you have done? Saved $45B in cash in case a virus like this causes the world economy to stop? There is no world where an airline/hotel or any business could have possibly saved enough cash to fight a 90%+ drop in revenue for months and still remain competitive in the market.
- adrr 7y agoApple and google have large cash reserves. They also could have paid off all their debt with the profits.
- saagarjha 7y agoI thought that for them it was just better to keep borrowing than to move around their money?
- lotsofpulp 7y agoApple and google are uniquely extremely high margin businesses, and even they would be shaken after a few months of no income.
- cycrutchfield 7y agoEspecially because they know that if they go under, the Federal government will have their back. It's win-win, baby! What's a moral hazard?
- jdavis703 7y agoBoeing’s crisis started long before CV19. The 737 Max debacle was already weighing heavily on their balance sheet. The point is, it’s hard to predict the future. Who knows if the future will bring a fatal bug in your software, a pandemic, or both. But regardless, we all know tough times will always happen, and to therefore be prepared.
- bogomipz 7y agoThe issue is not the stock buyback but the debt binge these companies have gone on to to buy back that stock. This has left them unprepared and exposed for any kind of a downturn. This exposure is being remedied compliments of the tax payer. "Privatize the profits but socialize the risk" seems to be their mantra. The buck only ever seems to stop at the CEO when the going is good. This is why they are being demonized.
- guru4consulting 7y agoApart from irresponsible behavior of not reducing debt or not keeping enough money reserves, few other points to note: - CEO and the executive board gets pay rise based on stock price increase which is a silly math because the total market cap does not increase.. - Share buyback gives a quick boost to share prices, and often, the executives have found to be selling shares immediately after share buyback. It's almost like they pre-plan the buyback and following stock sale. There are many studies showing this to be a more common practice.
- Uhhrrr 7y agoBird doesn't have any shares; they are on series D.
- briffle 7y agoright, why save when you can buy back your stock.
- geomark 7y agoMakes perfect sense when interest rates are near zero. Borrowing is practically free and saving earns you next to nothing.
- Blackthorn 7y agoUntil a black swan event happens...and now they need to beg the government to save their short sighted asses.
- kick 7y agoIf the government is almost guaranteed to bail them out, it makes sense that they would prioritize other things.
- PenguinCoder 7y agoThen the Government needs to not bail them out.
- kick 7y agoObviously, but it's hard to call a company's management short-sighted for taking advantage of a corrupt government.
- arbitrary_name 7y agoBut they are also the ones corrupting the government, at least in part. So let them all hang.
- kick 7y ago
- CPLX 7y agoSure but the fun part about these insanely well funded moonshot startups that lose money on every transaction is that all these shutdowns improve their gross margins and cashflow positions.
- kevindong 7y agoBut many American companies wouldn't have an issue borrowing money (at a reasonable interest rate) to continue operations since they're presumably profitable or at least approach break even. Has Bird ever been profitable? Even excluding the cost of buying the scooters (e.g. only considering op. ex.)?
- vikramkr 7y agoPlenty of companies will have trouble borrowing money, it's a financial crisis. Money market rates and rates on corporate paper were through the roof triggering a liquidity crisis. Looks like the fed is really stepping in agressively, and hopefully they'll succeed, but we already saw credit markets almost lock up. Doesn't matter if you're profitable if nobody is willing to lend.
- tomatocracy 7y agoLenders and credit investors are still very liquid at the moment; it's not a financial crisis and it's not at all the case that noone is willing to lend. But noone will lend to/invest in the credit of a non viable prospect and there will be more scrutiny about what's viable in current circumstances. The price of money has also gone up (despite central banks' best efforts) so there will be more discrimination between strong lending/investment propositions and weak ones, and the cost will be higher for everyone.
- hef19898 7y agoAt the same time startups in Germany are heavily lobbying for additional provisions in the economic relief programs to cover startups as well. Reading between the lines, "startups" (they are companies and thus eligible anyway based on standard conditions) refers to companies relying completely on external funding in the pursuit of positive cash flow and profitability further down the line. Looks a lot like a covered bailout for VCs and other investors. Because if a company was profitable before Corona, meaning banks would have provided credit already, the government is making it a lot easier and cheaper to get additional credit lines.
- sergiotapia 7y agoSo if people are broke, landlords are broke, stores are broke, companies are broke -- just who exactly has the keys to the kingdom here? Who isn't broke? Just banks?
- zaroth 7y agoWho is servicing their debt this month? No one. The banks are just as fucked as everyone else.
- sudoaza 7y agoAll the essentials who don't get locked and people are stocking on: health, supermarkets and their providers. Also those who are online or can be easily adapted: streaming, communication, online markets, education, soft development.
- pdonis 7y agoNot all of any of these are broke. Many companies have plenty of demand. Many companies have much greater than usual demand, or are shifting production to meet changed demand (for example, it looks like GM is going to be manufacturing ventilators). Those companies and their employees aren't broke--far from it. Not to minimize the impact on companies and people who are seeing drastically reduced demand, but it's a serious overstatement to say that all companies and people are.
- danaris 7y agoWell, right now, we have a serious problem with cash flow—that is, there isn't much cash flowing through the economy, because people are staying in their homes. So people who are still employed, but can't (or shouldn't) leave their homes still have some money, probably more than usual. But the primary answer to that question is the same as it's been for the past couple decades: the people with the money are, well, the people hoarding all the money. The owners, the (big) employers, the people at the top. As has been reported various places, just as an example, the airline industry spent the last decade spending something like 80-90% of every dollar they made buying back stock to enrich their executives. That's why they don't have anything saved for a crisis like this, and that's who has all the money now.
- trump2020yeh 7y agoThis is what happens when you let these liberal fucks do whatever they want. We should line them all up on the firing line. Straight fucking assholes.