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No. The right way is to issue 50B of stock back to the public. The shareholders who received 50B and are holding it in their personal emergency funds can buy it

No. The right way is to issue 50B of stock back to the public. The shareholders who received 50B and are holding it in their personal emergency funds can buy it back, or new investors can. There's more than enough private capital available without requiring the government to step in.

ceejayoz 7y ago
It's unlikely the market holds $50B in demand for airline stocks right now. Sending their shares to zero isn't going to help.
- tathougies 7y ago
  I've been loading up and I imagine many investors are.
  - ceejayoz 7y ago
    American, Delta, Southwest, and United have about 60% of the US market. They have a combined market cap of about $45B. The idea that the airlines could issue $50B in shares is a fantasy.
    - tathougies 7y ago
      I believe the 50B is for keeping everyone employed. That is what is fantasy. Most people ought to be laid off in these times. That is what unemployment insurance is for. Of course, that's not politically popular, which is why the government is becoming involved.
yzmtf2008 7y ago
> There's more than enough private capital available without requiring the government to step in. If that were true, the price wouldn't have tanked so much?
- tathougies 7y ago
  They haven't issued shares yet so we can't know
t0mas88 7y ago
The public currently wouldn't buy the stock due to bankruptcy risk. If the government commits to buying what's left at the same terms the public would start buying as well reducing the burden on taxpayers. Historically this kind of deal has been profitable for governments in the cases that I know of (in banking), while at the same time keeping more jobs and thus reducing economic impact of unemployment.
- tathougies 7y ago
  Oh i have no doubt the government will make money from this. I was saying what i thought the right way to finance this is. You say the gov will make money -- certainly true. It would be much better for the airlines to issue to the public though so the public can make money
- whatok 7y ago
  If the public wouldn't buy airlines stock because of "bankruptcy risk" then why was Carnival Cruise Lines able to raise more than $6bn in debt and equity recently?
  - toomuchtodo 7y ago
    Because Saudi Arabia bought a lot of that equity. Not who I want being a majority (EDIT: s/majority/substantial) owner in my country's airlines if they need a bailout; have the US Treasury own them. https://www.businessinsider.com/saudi-arabias-sovereign-wealth-fund-buys-a-stake-in-carnival-2020-4 https://www.businessinsider.com/saudi-arabias-sovereign-weal...
    - whatok 7y ago
      That's incorrect. PIF's stake was as of 3/26 while CCL did the equity deal on 4/1. I don't know if they participated in that equity deal but they would have to disclose if they increased ownership. The equity deal was only $500mm vs $5.75bn in converts and 1st lien bonds. Non-insiders did not know PIF invested in the company when they raised this recent $ so it's not like that was some sort of anchor. Also, given their recent investments, PIF owning a significant stake in anything should make you run the other way.
anthonypasq 7y ago
? The government is the public. Am i missing something?
- tathougies 7y ago
  NO the government is the government. A company issuing shares to the public means that any individual can choose to buy them or not. Issuing them to the government means the government buys them. The government is representative of the people but is not simply just the people in aggregate. It's like your parents buying stock for you and promising it to you in your inheritance versus buying a stock yourself. Sure, you can say that you own the stock if your parents promise it to you(In the sense that you will benefit from it eventually), but you don't own the stock simply because mom and dad do. They can change their mind, or decide to give all the money to your awkward brother.

ceejayoz 7y ago

It's unlikely the market holds $50B in demand for airline stocks right now. Sending their shares to zero isn't going to help.

tathougies 7y ago
I've been loading up and I imagine many investors are.
- ceejayoz 7y ago
  American, Delta, Southwest, and United have about 60% of the US market. They have a combined market cap of about $45B. The idea that the airlines could issue $50B in shares is a fantasy.
  - tathougies 7y ago
    I believe the 50B is for keeping everyone employed. That is what is fantasy. Most people ought to be laid off in these times. That is what unemployment insurance is for. Of course, that's not politically popular, which is why the government is becoming involved.

yzmtf2008 7y ago

> There's more than enough private capital available without requiring the government to step in. If that were true, the price wouldn't have tanked so much?

tathougies 7y ago
They haven't issued shares yet so we can't know

t0mas88 7y ago

The public currently wouldn't buy the stock due to bankruptcy risk. If the government commits to buying what's left at the same terms the public would start buying as well reducing the burden on taxpayers. Historically this kind of deal has been profitable for governments in the cases that I know of (in banking), while at the same time keeping more jobs and thus reducing economic impact of unemployment.

tathougies 7y ago
Oh i have no doubt the government will make money from this. I was saying what i thought the right way to finance this is. You say the gov will make money -- certainly true. It would be much better for the airlines to issue to the public though so the public can make money
whatok 7y ago
If the public wouldn't buy airlines stock because of "bankruptcy risk" then why was Carnival Cruise Lines able to raise more than $6bn in debt and equity recently?
- toomuchtodo 7y ago
  Because Saudi Arabia bought a lot of that equity. Not who I want being a majority (EDIT: s/majority/substantial) owner in my country's airlines if they need a bailout; have the US Treasury own them. https://www.businessinsider.com/saudi-arabias-sovereign-wealth-fund-buys-a-stake-in-carnival-2020-4 https://www.businessinsider.com/saudi-arabias-sovereign-weal...
  - whatok 7y ago
    That's incorrect. PIF's stake was as of 3/26 while CCL did the equity deal on 4/1. I don't know if they participated in that equity deal but they would have to disclose if they increased ownership. The equity deal was only $500mm vs $5.75bn in converts and 1st lien bonds. Non-insiders did not know PIF invested in the company when they raised this recent $ so it's not like that was some sort of anchor. Also, given their recent investments, PIF owning a significant stake in anything should make you run the other way.

anthonypasq 7y ago

? The government is the public. Am i missing something?

tathougies 7y ago
NO the government is the government. A company issuing shares to the public means that any individual can choose to buy them or not. Issuing them to the government means the government buys them. The government is representative of the people but is not simply just the people in aggregate. It's like your parents buying stock for you and promising it to you in your inheritance versus buying a stock yourself. Sure, you can say that you own the stock if your parents promise it to you(In the sense that you will benefit from it eventually), but you don't own the stock simply because mom and dad do. They can change their mind, or decide to give all the money to your awkward brother.