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I'm not sure why this is being framed as an Ozempic story, when if anything it seems like it's more of a cautionary tale on not taking on $1.5 billion dollars o

I'm not sure why this is being framed as an Ozempic story, when if anything it seems like it's more of a cautionary tale on not taking on $1.5 billion dollars of debt to buy back shares near all-time highs and crippling your company for over a decade before ultimately forcing it to file for bk. https://www.prnewswire.com/news-releases/weight-watchers-announces-plan-to-launch-self-tender-offer-and-related-stock-repurchase-for-up-to-15-billion-of-its-common-stock-139312453.html https://www.prnewswire.com/news-releases/weight-watchers-ann... Its stock tumbled ever since those highs and likely wouldn't have ever recovered had Oprah not bought and pumped it. To this day they still carry over a billion dollars in debt. In fairness to the WW board of the last couple of years, they did make a of reasonable pivot to try to rectify the ship (like buying a telehealth service which prescribed Ozempic), but ultimately it seems like this buyback from 13 years ago created a burden that just made them unable to weather the storm gracefully.

wronglebowski 1y ago
What's the argument for stock buyback programs generally? We have more cash than we know how to spend reasonably?
- bern4444 1y ago
  It's like a tax free dividend. Dividends are taxable but if a company uses the cash they would have spent on a dividend on a buy back there's no taxable event for the investors. Those investors who want the cash can sell and pay the tax and the rest enjoy the higher share price
  - musicale 1y ago
    Incentivizing short-term investors to dump stock by boosting the price temporarily? I guess that's a strategy.
    - Kirby64 1y ago
      In a purely rational market, buying back shares doesn't boost stock price temporarily... it boosts it forever. You buy back shares and 'retire' them, thereby making everyone else's shares more valuable. Now, if you're using debt to finance share buy backs, then yeah... it's a short term ploy. But most companies don't use buy backs this way.
      - kd5bjo 1y ago
        > You buy back shares and 'retire' them, thereby making everyone else's shares more valuable. But the cash outflow to purchase those shares makes the company less valuable at the same time. In a completely efficient market, the amount of money that the company pays to buy back a share should be exactly balanced by the ownership percentage of that share, resulting in no net change to the price of the company's other shares.
        mattclarkdotnet 1y ago
        Yes but as a shareholder I get an untaxed unrealised capital gain instead of a taxable dividend. I’m not a fan of taxing unrealised capital gains but this particular loophole could do with closing
        triceratops 1y ago
        To close the loophole, ban buybacks. Or at least severely restrict them in some way. If a company wants to return profits let them issue dividends.
        victorbjorklund 1y ago
        But the tax will be paid when the stock is sold. It is more like letting the investor choose when to realise the gain and trigger the tax vs dividend that will happen regardless of wether the investor needs the money at that time or not.
        1y ago
- tbrownaw 1y ago
  Yes. If you have more money than you're able to make good use of improving the company (r&d, acquisitions, new locations, whatever), you can give it back to investors. Which can be either a dividend or a buyback, and in theory (ie, ignoring pesky details like taxes) those are supposed to be equivalent.
  - JackFr 1y ago
    An enterprise can be financed with debt or equity. Issuing debt to buy back shares is simply changing the capital structure of the firm. It lacks a moral component.
    - deleted 1y ago
      [deleted]
- andrekandre 1y ago
  > We have more cash than we know how to spend reasonably? literally all kinds of things could be done... - pay your workers a good bonus? - invest the money in the market? - lower prices? > What's the argument for stock buyback programs generally? they used to be illegal because its a form of stock price manipulation* * https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-should-be-required-to-vote-on-stock-buybacks https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...
  - musicale 1y ago
    > Give shareholders the right to vote on buybacks. I like the idea of giving long-term shareholders an easier way to weigh in on buybacks.
    - danielmarkbruce 1y ago
      No need. They aren't forced to change their % ownership and if they think the price is too high they should sell anyway.
  - nradov 1y ago
    That's silly. It's a business, not a charity. When I'm a shareholder in a business I don't want management wasting my capital by investing it in the stock market when they run out of growth opportunities. Just give me the cash back (preferably in the form of stock buy backs) and then I can invest that cash in other businesses myself.
  - dehrmann 1y ago
    > invest the money in the market? Unless you're Berkshire, most investors don't want this. They buy a company for its success in widgetry. If they wanted to pay someone to invest in the market, they'd buy an actively managed fund.
- cortesoft 1y ago
  It can also be that the company leadership thinks the stock is undervalued.
musicale 1y ago
> taking on $1.5 billion dollars of debt to buy back shares near all-time highs > To this day they still carry over a billion dollars in debt. Bankruptcy sounds like the only option, but the initial borrowing sounds like incredible mismanagement.
- mlinhares 1y ago
  Not mismanagement if you made a lot of shareholder value with the buybacks.
  - ricardobeat 1y ago
    Generating shareholder value while wiping out twenty thousand jobs, killing the business and eventually going bankrupt. The epitome of business success
    - musicale 1y ago
      I think that's "extracting" shareholder value. Like extracting value from a patient in the form of removable organs.
      - bcrosby95 1y ago
        In theory extracting multiple organs from one person will save more people than it kills. But that isn't really true when you're talking about plays like this. More people are made worse off than better.
      - jordanb 1y ago
        Literally the phrase is "unlocking brand value" "brand value" -> trust people have in the company/product "unlocking" -> betraying that trust in a bustout
  - bawolff 1y ago
    But they didn't, as evidenced by the bankruptcy. The whole, everything stupid a company does is "increasing shareholder value" meme is annoying. Not every dumb action a company does can be explained that way.
danielmarkbruce 1y ago
Because revenue took a very sharp decline when ozempic was approved.... which caused it to not be able to service debt. The company is worth zero. It was worth zero the minute the GLP-1s became viable. Whether it was financed with debt or equity matters not.
hapless 1y ago
Stock buybacks are substantially equivalent to dividends. You issue a dividend when you have nothing to invest in that will develop shareholder value. Buybacks work the same way. You have a stock of capital, or a great borrowing opportunity, and nothing to do with it. Most companies always have another idea to do a new thing, that might induce growth. WW did not. WW has been in trouble for decades, because their business model pre-supposes consumers are too stupid to use a search engine. (Does "weight watchers" work? No. No it doesn't.) The debt-for-buyback swap is a symptom, not a cause. Management had nowhere to go, no vision for growth, and when you are out of ideas and you are offered an attractive loan, you do a buyback.
- cortesoft 1y ago
  A company can also decide to do stock buybacks if the leadership thinks its stock is undervalued.
- niemandhier 1y ago
  Buybacks also protect you from hostile takeovers, or from a competitor buying shares until they are entitled to a seat on the board. The latter was the the end of several large German companies.
- dehrmann 1y ago
  > Stock buybacks are substantially equivalent to dividends There's a whole theory on this: https://www.investopedia.com/terms/d/dividendirrelevance.asp https://www.investopedia.com/terms/d/dividendirrelevance.asp The easy way to see it is if all shareholders reinvest dividends, it's the same as a share buyback, only with the broker buying shares on your behalf rather than the company, and your ownership of the company includes a bonus fractional share. Dividends are also a bit of an accounting game. You can pay yourself a "dividend" whenever you want buy selling shares. This is only 95% true, but if your share in a company just entitled you to 65 cents, the share is probably worth about 65 cents less since the money came from somewhere.
vkou 1y ago
> I'm not sure why this is being framed as an Ozempic story I am. Because just like how I've always got someone else to blame for why I never cleaned my room, executives can always find someone else to blame for why the business they are running went to shit. And the press loves to run with a good just-so story that paints some indefatigable foreign villain as the cause of a company's demise, instead of boring, banal mismanagement.
- danielmarkbruce 1y ago
  This is a dumb take. WW was dead no matter what they did. They got beat by the worlds greatest ever mousetrap - GLP-1s.
- know-how 1y ago
  [dead]
nitwit005 1y ago
> I'm not sure why this is being framed as an Ozempic story Look at all the comments discussing the drug instead of the company. If there is a topic people are interested in, stuff it in the headline.
dehrmann 1y ago
> near all-time highs Because of inflation and market growth, a company that isn't shrinking should usually be sorta close to an all-time high.
stuaxo 1y ago
The amount of companies going bankrupt because the board has taken all their money seems very high.
- ryandrake 1y ago
  Don't forget the companies where Private Equity swoops in and takes all their money. We seem to be squarely in the "loot all the well known brands, take whatever is not nailed down, and leave their carcasses by the side of the road" stage of Capitalism.
  - skyyler 1y ago
    Where does it go from here? It seems grim.
    - anon192831 1y ago
      Hopefully new upstarts with a vision for quality. It seems that every brand starts out with noble intentions, then after rising to meteoric success, they get gutted and we have to wait for the new, high quality up start.
  - know-how 1y ago
    [dead]
blitzar 1y ago
Management are rich so they obviously are financial and business geniuses, so it can't have been mismanagement - they must be some external factor to blame. Ozempic seems like a pretty good fall guy for this one.

wronglebowski 1y ago

What's the argument for stock buyback programs generally? We have more cash than we know how to spend reasonably?

bern4444 1y ago
It's like a tax free dividend. Dividends are taxable but if a company uses the cash they would have spent on a dividend on a buy back there's no taxable event for the investors. Those investors who want the cash can sell and pay the tax and the rest enjoy the higher share price
- musicale 1y ago
  Incentivizing short-term investors to dump stock by boosting the price temporarily? I guess that's a strategy.
  - Kirby64 1y ago
    In a purely rational market, buying back shares doesn't boost stock price temporarily... it boosts it forever. You buy back shares and 'retire' them, thereby making everyone else's shares more valuable. Now, if you're using debt to finance share buy backs, then yeah... it's a short term ploy. But most companies don't use buy backs this way.
    - kd5bjo 1y ago
      > You buy back shares and 'retire' them, thereby making everyone else's shares more valuable. But the cash outflow to purchase those shares makes the company less valuable at the same time. In a completely efficient market, the amount of money that the company pays to buy back a share should be exactly balanced by the ownership percentage of that share, resulting in no net change to the price of the company's other shares.
      - mattclarkdotnet 1y ago
        Yes but as a shareholder I get an untaxed unrealised capital gain instead of a taxable dividend. I’m not a fan of taxing unrealised capital gains but this particular loophole could do with closing
        triceratops 1y ago
        To close the loophole, ban buybacks. Or at least severely restrict them in some way. If a company wants to return profits let them issue dividends.
        victorbjorklund 1y ago
        But the tax will be paid when the stock is sold. It is more like letting the investor choose when to realise the gain and trigger the tax vs dividend that will happen regardless of wether the investor needs the money at that time or not.
        1y ago
tbrownaw 1y ago
Yes. If you have more money than you're able to make good use of improving the company (r&d, acquisitions, new locations, whatever), you can give it back to investors. Which can be either a dividend or a buyback, and in theory (ie, ignoring pesky details like taxes) those are supposed to be equivalent.
- JackFr 1y ago
  An enterprise can be financed with debt or equity. Issuing debt to buy back shares is simply changing the capital structure of the firm. It lacks a moral component.
  - deleted 1y ago
    [deleted]
andrekandre 1y ago
> We have more cash than we know how to spend reasonably? literally all kinds of things could be done... - pay your workers a good bonus? - invest the money in the market? - lower prices? > What's the argument for stock buyback programs generally? they used to be illegal because its a form of stock price manipulation* * https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-should-be-required-to-vote-on-stock-buybacks https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...
- musicale 1y ago
  > Give shareholders the right to vote on buybacks. I like the idea of giving long-term shareholders an easier way to weigh in on buybacks.
  - danielmarkbruce 1y ago
    No need. They aren't forced to change their % ownership and if they think the price is too high they should sell anyway.
- nradov 1y ago
  That's silly. It's a business, not a charity. When I'm a shareholder in a business I don't want management wasting my capital by investing it in the stock market when they run out of growth opportunities. Just give me the cash back (preferably in the form of stock buy backs) and then I can invest that cash in other businesses myself.
- dehrmann 1y ago
  > invest the money in the market? Unless you're Berkshire, most investors don't want this. They buy a company for its success in widgetry. If they wanted to pay someone to invest in the market, they'd buy an actively managed fund.
cortesoft 1y ago
It can also be that the company leadership thinks the stock is undervalued.

musicale 1y ago

> taking on $1.5 billion dollars of debt to buy back shares near all-time highs > To this day they still carry over a billion dollars in debt. Bankruptcy sounds like the only option, but the initial borrowing sounds like incredible mismanagement.

mlinhares 1y ago
Not mismanagement if you made a lot of shareholder value with the buybacks.
- ricardobeat 1y ago
  Generating shareholder value while wiping out twenty thousand jobs, killing the business and eventually going bankrupt. The epitome of business success
  - musicale 1y ago
    I think that's "extracting" shareholder value. Like extracting value from a patient in the form of removable organs.
    - bcrosby95 1y ago
      In theory extracting multiple organs from one person will save more people than it kills. But that isn't really true when you're talking about plays like this. More people are made worse off than better.
    - jordanb 1y ago
      Literally the phrase is "unlocking brand value" "brand value" -> trust people have in the company/product "unlocking" -> betraying that trust in a bustout
- bawolff 1y ago
  But they didn't, as evidenced by the bankruptcy. The whole, everything stupid a company does is "increasing shareholder value" meme is annoying. Not every dumb action a company does can be explained that way.

danielmarkbruce 1y ago

Because revenue took a very sharp decline when ozempic was approved.... which caused it to not be able to service debt. The company is worth zero. It was worth zero the minute the GLP-1s became viable. Whether it was financed with debt or equity matters not.

hapless 1y ago

Stock buybacks are substantially equivalent to dividends. You issue a dividend when you have nothing to invest in that will develop shareholder value. Buybacks work the same way. You have a stock of capital, or a great borrowing opportunity, and nothing to do with it. Most companies always have another idea to do a new thing, that might induce growth. WW did not. WW has been in trouble for decades, because their business model pre-supposes consumers are too stupid to use a search engine. (Does "weight watchers" work? No. No it doesn't.) The debt-for-buyback swap is a symptom, not a cause. Management had nowhere to go, no vision for growth, and when you are out of ideas and you are offered an attractive loan, you do a buyback.

cortesoft 1y ago
A company can also decide to do stock buybacks if the leadership thinks its stock is undervalued.
niemandhier 1y ago
Buybacks also protect you from hostile takeovers, or from a competitor buying shares until they are entitled to a seat on the board. The latter was the the end of several large German companies.
dehrmann 1y ago
> Stock buybacks are substantially equivalent to dividends There's a whole theory on this: https://www.investopedia.com/terms/d/dividendirrelevance.asp https://www.investopedia.com/terms/d/dividendirrelevance.asp The easy way to see it is if all shareholders reinvest dividends, it's the same as a share buyback, only with the broker buying shares on your behalf rather than the company, and your ownership of the company includes a bonus fractional share. Dividends are also a bit of an accounting game. You can pay yourself a "dividend" whenever you want buy selling shares. This is only 95% true, but if your share in a company just entitled you to 65 cents, the share is probably worth about 65 cents less since the money came from somewhere.

vkou 1y ago

> I'm not sure why this is being framed as an Ozempic story I am. Because just like how I've always got someone else to blame for why I never cleaned my room, executives can always find someone else to blame for why the business they are running went to shit. And the press loves to run with a good just-so story that paints some indefatigable foreign villain as the cause of a company's demise, instead of boring, banal mismanagement.

danielmarkbruce 1y ago
This is a dumb take. WW was dead no matter what they did. They got beat by the worlds greatest ever mousetrap - GLP-1s.
know-how 1y ago
[dead]

nitwit005 1y ago

> I'm not sure why this is being framed as an Ozempic story Look at all the comments discussing the drug instead of the company. If there is a topic people are interested in, stuff it in the headline.

dehrmann 1y ago

> near all-time highs Because of inflation and market growth, a company that isn't shrinking should usually be sorta close to an all-time high.

stuaxo 1y ago

The amount of companies going bankrupt because the board has taken all their money seems very high.

ryandrake 1y ago
Don't forget the companies where Private Equity swoops in and takes all their money. We seem to be squarely in the "loot all the well known brands, take whatever is not nailed down, and leave their carcasses by the side of the road" stage of Capitalism.
- skyyler 1y ago
  Where does it go from here? It seems grim.
  - anon192831 1y ago
    Hopefully new upstarts with a vision for quality. It seems that every brand starts out with noble intentions, then after rising to meteoric success, they get gutted and we have to wait for the new, high quality up start.
- know-how 1y ago
  [dead]

blitzar 1y ago

Management are rich so they obviously are financial and business geniuses, so it can't have been mismanagement - they must be some external factor to blame. Ozempic seems like a pretty good fall guy for this one.