Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow
A firm who returns free cash flow to shareholders and then defaults on debt is transferring money from bondholders to shareholders.
"Barack Obama says banks paid back all the federal bailout money" https://www.politifact.com/factchecks/2012/oct/25/barack-oba...
Opportunity cost, the banks in no way payed out what that money was worth at the time. Hand me 1 billion interest free for 5 years and sure I will pay the money back, but...
Yes but assuming bankruptcy would have actually destroyed the US economy (highly debatable) then it was a low cost measure.
Capitalize profits socialize losses that is American corporate way. Executives keep the profit and expect taxpayers to bailout losses.
The TARP bailouts turned over $10bill profit.
How much TARP invested and how much it profited. Now compare that with how much Warren Buffett invested in Goldman Sachs and how much he profited. No wonder GS decided to become bank, access to taxpayers money is much cheaper.
The argument here is that they actually did need it to sustain operations since there's a significant chance they'll now receive a bailout. The whole point is they took cash they should have kept as a backup and then used it to boost share price instead.
Which is a fair point but ... and I'm going to stop after this because I've made my point to the best of my ability ... but if they did that then the money wouldn't be called free cash flow because they've decided they need it for emergencies. They could be extremely risk tolerant and they'd still be sending all their FCF to shareholders. The amount would simply be smaller. I'm totally on board that bailouts are the…
That's not true. The definition of free cash flow includes cash the firm keeps on hand. Any positive change in Apple's "cash and cash equivalents" counts as free cash flow, for example.
FCF is supposed to go to shareholders: it's what's left over after spending money running and growing the business. And this problem (and related solutions) will probably apply not just to airlines but also restaurants, retailers, etc. In normal circumstances, chewz is right and they should either call up more capital from existing shareholders or go under. But these are not normal circumstances. 1) Everyone is capit…
they are airlines, not banks. They are important but we need not fear collapse if they disappear. No doubt some will survive, somehow. Saving them would not be a waste of money, but the money can be better spent. For example on disease control and medical care.
Whats the difference with banks? If a bank goes bankrupt won't someone come in and buy at a low price? The deposits in the bank wont disappear..
Btw most of these shareholders have been smart enough to sell immediately when the markets began falling so they will buy these stocks at the bottom and get bailed out all over again by the taxpayer and watch the capital multiply. I'm all for getting rich but pump and dumps should be (are?) illegal.
> Btw most of these shareholders have been smart enough to sell immediately when the markets began falling so they will buy these stocks at the bottom and get bailed out all over again by the taxpayer and watch the capital multiply. If they sold, then they're no longer shareholders; there are new shareholders, and they will be the ones to receive any potential bailout. There's two sides to every transaction. If peopl…
Please don't be facetious. The OP was clearly implying that the ones who make it ahead in such situations is that very "sophisticated" class of inveators. They surely did not mean that a literal specific investor will somehow get gains from not owning a stock he has sold. Talk about a ridiculous strawman.
Apple has done more buybacks than anyone! And pays a dividend. > Since 2012, Apple has been buying back shares at the extraordinary rate of around $10 billion per quarter. Shareholders demanded it.
Apple has gigantic amounts of free cash flow, which is why they have $100 billion of cash on their balance sheet, despite their buybacks.
These companies have gutted their research and development costs to increase free cash flow. For example, Boeing’s share repurchase program also accelerated as BA reached all time highs and became an extremely risky asset after the second MAX crash and endless FAA investigations. That’s a senseless use of capital yet they’re asking tax payers for bailouts.
We’re talking about airlines, not Boeing. How much R&D should they be doing?
You mean they couldn’t be doing R&D into better flight paths for fuel economy or risk? What about finding ways to better transact with the end client? Or a better way to deal with cargo? How’s about research into a machine to better load cargo into the plane?
Wiki says: > free cash flow to firm (FCFF) is a way of looking at a business's cash flow to see what is available for distribution among all the securities holders of a corporate entity. [0] What do people expect them to do with free cash flow? The point of free cash flow is to get the money back to shareholders. These aren't high-growth industries. [0] https://en.wikipedia.org/wiki/Free_cash_flow
Pay employees more, increase benefits, better service for customers, put money away for a rainy day? There are lots of ways to spend money that are good for the long term rather than making the rich richer.
Delta just paid every employee 14% of their pay earlier this year after a blockbuster 2019. I bet they are rethinking that decision.
Btw most of these shareholders have been smart enough to sell immediately when the markets began falling so they will buy these stocks at the bottom and get bailed out all over again by the taxpayer and watch the capital multiply. I'm all for getting rich but pump and dumps should be (are?) illegal.
> Btw most of these shareholders have been smart enough to sell immediately when the markets began falling so they will buy these stocks at the bottom and get bailed out all over again by the taxpayer and watch the capital multiply. If they sold, then they're no longer shareholders; there are new shareholders, and they will be the ones to receive any potential bailout. There's two sides to every transaction. If peopl…
Ah if only that was the case. Turns out, when the government is involved then the taxpayer is buying but the government is deciding what to buy.
There is no hedge fund buying airlines right now. There will be a shitload of them lining up once the government commits to buying the debt because then they know there's only upside from there.