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Rather than converting the liquid operating budget into paid fines, it converts the shares retained by the company. A company this big doesn't need to sell sha
by MSFT_Edging 4y ago
Rather than converting the liquid operating budget into paid fines, it converts the shares retained by the company.
A company this big doesn't need to sell shares to get operating capital. This should apply to any company that does stock buybacks to inflate stock price, rather than reinvesting into their company, employees, etc.
- jefftk 4y agoDepending on the details, this is the same as charging a fine in money or it's worse. Say the company is worth $1B and has 10M shares that are trading at $100 each. Now there's an accident that will lead to a $100M fine. This get priced in, the value of the company is now $900M, and the stock goes to $90/share. Whether they send $100M to the government in cash or by issuing 11M shares, either way the stock price stays at $90 and investors are equally affected. On the other hand, if the amount of the fine is higher than the value of the company you'd much rather be a creditor than a shareholder, since in bankruptcy the stock goes to zero.