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French companies benefiting from state aid can't buy back shares

uk.reuters.com

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Re: French companies benefiting from state aid can't buy back shares

#31

Post by eloisant »

WalterBright wrote: post #18
redis_mlc wrote: post #4

Prediction: that won't be a precondition in the USA, and if it was, most companies would decline the aid. You see, buybacks are "that one weird trick" where you can steal from the market, by inflating the EPS and hence your employee stock options, and not go to jail.

It's not "stealing" from the market. All it does is increase the value of each share in proportion.

It's not stealing from the market, but it's essentially giving away money to shareholders by spending to inflate the stock price.

In a way it's similar to dividends, but not taxes in the same way.

Basically the logic behind the French government reasoning is "we're giving you money to support your business and your employees, not to give it away to shareholders".

Note that this wasn't the initial plan of the French governement, initially the plan was to pose no conditions, just saying "please be responsible in your choice". It's after the public backlash that they finally put conditions.

Re: French companies benefiting from state aid can't buy back shares

#32

Post by lazyasciiart »

jylam wrote: post #26
C4stor wrote: post #23

Earlier quoted context omitted.

That's strictly false. The article clearly states that _initially_ companies were called to moderation, and that _now_ a law project will be passed to strictly forbids this. "Le président de la République Emmanuel Macron a franchi un cap, vendredi matin, lors d’une rencontre téléphonique avec les partenaires sociaux, en annonçant que M. Le Maire soumettrait au premier ministre Edouard Philippe un projet pour encadrer…

Again, what I say is not "stricly false" at all, I'm just quoting Le Maire. And he's just talking about taxes, not partial unemployment.

You're not just quoting Le Marie, you're arguing that Reuters is wrong.

Re: French companies benefiting from state aid can't buy back shares

#33

Post by eloisant »

Adiqq wrote: post #5

I'm not from France, but is it controversial at all? If company wants state support, money needs to stay at the company, that's what it is about, right? Do companies in France could abuse this rule in other way?

The controversial part is that initially the government didn't pose any condition at all.

There was a huge public backlash, which is why the government changed their plan.

Re: French companies benefiting from state aid can't buy back shares

#34

Post by ajsnigrutin »

sfj wrote: post #20
mooshmoosh wrote: post #14

Perhaps a better approach would be to require these companies to maintain capital ratios like we do for banks. They could be forced to raise more equity if their debt becomes too large. After all the point should be to prevent them from needing future bailouts. I mean there are other ways to extract money from a company than paying dividends or doing share buy backs. Are they also going to cap salaries for employees?…

Why aren't we letting them fail instead of allowing these idiots to stay in business? Say American Airlines went bust. It's debtors would get its planes and other company assets, who would then in turn sell them to other airlines. A new airline might form to take its place, which would probably be a little more prudent than the last one.

In some indistries, that means thousands of people without work, and hundreds of other companies in the supply chain going bankrupt, and even more people without work. Sometimes it's cheaper to bail out the main company, then to deal with the unemployed, many more bankrupt companies etc.

But some regulation should be put in place... if a CEO fscked up the company so much, it needed government bailout, they don't deserve a bonus, no matter what their contract says. A good system would also be, to turn a bailout into a 'long-term loan' from the government, and have a mandatory percentage of the companies profits go to repaying the 'loan', with some regulation on internal business (to prevent dumping everything to a new, 'clean' company, and letting the old shell fail).

Re: French companies benefiting from state aid can't buy back shares

#35

Post by patall »

pianom4n wrote: post #25
neximo64 wrote: post #7

Earlier quoted context omitted.

To play devil's advocate here, how is that any different from increasing your dividends?

It's exactly the same as a dividend, except the tax consequences are opt-in for shareholders. Only those who sell their shares are affected, unlike dividends which are equivalent to forcing all shareholders to sell an equal portion. Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math. In the article it says this rule ap…

> Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math

Or from people who do exactly realize this and have though through the math. I mean, its not like there is no reason why dividends tend to be taxed ...

Re: French companies benefiting from state aid can't buy back shares

#36

Post by dragonwriter »

pianom4n wrote: post #25
neximo64 wrote: post #7

Earlier quoted context omitted.

To play devil's advocate here, how is that any different from increasing your dividends?

It's exactly the same as a dividend, except the tax consequences are opt-in for shareholders. Only those who sell their shares are affected, unlike dividends which are equivalent to forcing all shareholders to sell an equal portion. Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math. In the article it says this rule ap…

> Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math.

No, a lot of it is from people who aren't too keen on capitalism or the means by which corporations return capital to the capitalist class in general, and particularly when it is “tax efficient”.

Re: French companies benefiting from state aid can't buy back shares

#37

Post by mooshmoosh »

sfj wrote: post #20
mooshmoosh wrote: post #14

Perhaps a better approach would be to require these companies to maintain capital ratios like we do for banks. They could be forced to raise more equity if their debt becomes too large. After all the point should be to prevent them from needing future bailouts. I mean there are other ways to extract money from a company than paying dividends or doing share buy backs. Are they also going to cap salaries for employees?…

Why aren't we letting them fail instead of allowing these idiots to stay in business? Say American Airlines went bust. It's debtors would get its planes and other company assets, who would then in turn sell them to other airlines. A new airline might form to take its place, which would probably be a little more prudent than the last one.

I definitely agree. Companies should be allowed to go bust more! Especially if they're in trouble because they didn't maintain a safety net of capital.

Unfortunately companies are often able to convince politicians, and the public that they're critically important, or too big to fail. They say that many other companies depend on them, and if they're allowed to go bust they will be "the next lehman brothers" with many other companies cascading and failing.

So I think bailouts are going to continue be a thing indefinitely. And if we can't stop bailouts from happening, making them come with conditions - like safer capital ratios - that make bailouts less likely in the future would be a good thing.

Re: French companies benefiting from state aid can't buy back shares

#38

Post by jylam »

lazyasciiart wrote: post #32
jylam wrote: post #26

Earlier quoted context omitted.

Again, what I say is not "stricly false" at all, I'm just quoting Le Maire. And he's just talking about taxes, not partial unemployment.

You're not just quoting Le Marie, you're arguing that Reuters is wrong.

Yes I am. State aid is not only guaranteed bonds. Partial unemployement is, too.

Re: French companies benefiting from state aid can't buy back shares

#39

Post by C4stor »

jylam wrote: post #26
C4stor wrote: post #23

Earlier quoted context omitted.

That's strictly false. The article clearly states that _initially_ companies were called to moderation, and that _now_ a law project will be passed to strictly forbids this. "Le président de la République Emmanuel Macron a franchi un cap, vendredi matin, lors d’une rencontre téléphonique avec les partenaires sociaux, en annonçant que M. Le Maire soumettrait au premier ministre Edouard Philippe un projet pour encadrer…

Again, what I say is not "stricly false" at all, I'm just quoting Le Maire. And he's just talking about taxes, not partial unemployment.

The title is

> French companies benefiting from state aid can't buy back shares

You stated "That's a false statement"

However it is in fact a true statement, since a law is effectively passed to forbid the very thing the post title describes.

Hence stating "That's a false statement" is "strictly false", and quoting a part of an article that explains that the exact thing you're quoting is now outdated doesn't make it less false somehow.

If you want to mean that companies "can" still buy back shares, although it's now illegal, well, that's just refusing to give the post title an honest interpretation of what it means.

Re: French companies benefiting from state aid can't buy back shares

#40

Post by btrask »

Why aren't shareholders on the hook for bailing out their own companies? They have the financial incentive to protect their own investments.

Why is bailing out a compay different from "investing" in it? What is an investment besides a non-emergency bailout?

Edit: Why don't companies raise money by issuing more stock? Isn't that what the stock matket is for?

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