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Especially 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 price

Especially 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 ago
Isn'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 ago
    They 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 ago
  They 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 ago
  Yes 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 ago
  The 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 ago
  That'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 ago
    What 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 ago
      Apple and google have large cash reserves. They also could have paid off all their debt with the profits.
      - saagarjha 7y ago
        I thought that for them it was just better to keep borrowing than to move around their money?
      - lotsofpulp 7y ago
        Apple and google are uniquely extremely high margin businesses, and even they would be shaken after a few months of no income.
    - cycrutchfield 7y ago
      Especially 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 ago
      Boeing’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 ago
  The 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 ago
  Apart 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 ago
Bird doesn't have any shares; they are on series D.

Especially 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 ago

Isn'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 ago
  They 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 ago
They 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 ago
Yes 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 ago
The 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 ago
That'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 ago
  What 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 ago
    Apple and google have large cash reserves. They also could have paid off all their debt with the profits.
    - saagarjha 7y ago
      I thought that for them it was just better to keep borrowing than to move around their money?
    - lotsofpulp 7y ago
      Apple and google are uniquely extremely high margin businesses, and even they would be shaken after a few months of no income.
  - cycrutchfield 7y ago
    Especially 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 ago
    Boeing’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 ago
The 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 ago
Apart 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 ago

Bird doesn't have any shares; they are on series D.