French companies benefiting from state aid can't buy back shares • Hacker News Board

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

#51

Post by hnarn » Mon, Mar 30, 2020, 10:27 AM UTC

The same discussion is happening in Sweden.[1] The minister of finance has basically said that (my translation):

> The tax payers are taking a risk, so they should also have the possibility to join the rebound, when it comes, and get some of that money back.

And regarding dividends:

> If you take part of different forms of state financed support, of course it will look bad if you at the same time give out large dividends.

[1]: https://www.dn.se/ekonomi/magdalena-andersson-oppnar-for-oka...

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

#52

Post by hnarn » Mon, Mar 30, 2020, 10:28 AM UTC

londons_explore wrote: post #50

hnarn wrote: post #46

Earlier quoted context omitted.

> Why is bailing out a compay different from "investing" in it? What is an investment besides a non-emergency bailout? Bailing a company out is just a euphemism for making a very high risk investment that the market is unwilling to do. Putting aside whether that is the correct thing to do or not, the option would likely (in a recession) be mass unemployment, so there's an incentive from the state, that likely wishes…

It's a loan with conditions. Not all that unusual. Each company can decide if they accept the conditions or want to reject the loan offer and get their finance elsewhere.

I agree, and it's not unusual, but presumably if the company could get a better deal from the market they wouldn't be taking the state bailout in the first place.

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

#53

Post by londons_explore » Mon, Mar 30, 2020, 10:28 AM UTC

mcv wrote: post #10

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.

So US companies will take government money intended to rescue jobs and businesses, and instead use them for some quick profit for their shareholders and executives. I think those French conditions are entirely reasonable and sensible.

... use them for some quick profit for their shareholders and executives and rescue the business.

One can't spend half the money and have one but not the other.

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

#54

Post by sfj » Mon, Mar 30, 2020, 10:28 AM UTC

adev_ wrote: post #41

sfj wrote: post #20

Earlier quoted context omitted.

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.

> A new airline might form to take its place, which would probably be a little more prudent than the last one. It's a pretty innocent view of the world. Or the new company would just behave exactly like the old one because it is the best short term strategy for shareholders. And anyway, in case of new crisis, their new high executive will sell their share right before (exactly like Jeff Bezos did https://www.theguard…

You think that bailing all these companies out has no effect on how companies run their business going forward? And you claim I have an “innocent view of the world”...

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

#55

Post by ddebernardy » Mon, Mar 30, 2020, 10:29 AM UTC

moviuro wrote: post #15

jylam wrote: post #13

That's a false statement, Le Maire said that he ask shareholders not to. Companies and shareholders can do what the hell they want.

Right now, it's your word against Reuter's. Do you have a source?

Bruno Le Maire said so himself this morning on TV:

https://www.francetvinfo.fr/sante/maladie/coronavirus/bruno-...

J'invite (...) toutes les entreprises qui ont accès aujourd'hui au chômage partiel, c'est-à-dire qui ont leurs salariés payés par l'Etat, à faire preuve de la plus grande modération en matière de versement de dividendes"

https://www.youtube.com/watch?v=LQnzcCyh7Bc

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

#56

Post by btrask » Mon, Mar 30, 2020, 10:29 AM UTC

hnarn wrote: post #46

btrask wrote: post #40

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?

> Why is bailing out a compay different from "investing" in it? What is an investment besides a non-emergency bailout? Bailing a company out is just a euphemism for making a very high risk investment that the market is unwilling to do. Putting aside whether that is the correct thing to do or not, the option would likely (in a recession) be mass unemployment, so there's an incentive from the state, that likely wishes…

Okay, but why is buying a company's stock not the same as bailing it out? If you're "investing" in the business, why does money have to be given to them directly, using a completely different mechanism?

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

#57

Post by bradleyjg » Mon, Mar 30, 2020, 10:30 AM UTC

hnarn wrote: post #48

bradleyjg wrote: post #43

I don’t have a big problem with stock buybacks in general. But if companies buy back stock when times are flush they ought to be issuing new stock to raise money when times are lean. Not putting their hands out to the public fisc.

Just for the sake of argument, isn't the argument against buybacks that it may skew the indicators for how well the company is doing? You have earnings and then you have amount of shares: buy some shares from the public, and your "earnings per share" goes up even if the earnings haven't changed. In my view, this is radically different from, for example, buying the whole public stock and going private.

If that were so, then the accounting profession has failed at its core responsibility. But I don’t think it has, the information is there for investors to see. If some investors choose to obsessively focus on a single metric, well—-a fool and his money are soon parted.

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

#58

Post by sametmax » Mon, Mar 30, 2020, 10:30 AM UTC

btrask wrote: post #40

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?

Investing is privatizing the risks and the benefits.

Bailing out is privatizing the benefits but mutualizing the risks.

It's taking what favors you from both capitalism and socialism, call that a free market, and pretend it's for the common good. You always win.

People says communism didn't work looking at Russia and China. But the ruling class will abuse any system to the point it doesn't look like the original idea at all, if not kept in check. It's true for capitalism as well, as we can see.

To me, being able to do this is proof we are still not in a democracy.

We enjoy a lot of freedoms, so we are not in a dictature. But we are still not in power. We're just told we are.

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

#59

Post by sametmax » Mon, Mar 30, 2020, 10:31 AM UTC

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.

Don't worry, they will be plenty of exceptions and deals in France to bypass that after the fact. We just won't hear about it.

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

#60

Post by hnarn » Mon, Mar 30, 2020, 10:34 AM UTC

btrask wrote: post #56

hnarn wrote: post #46

Earlier quoted context omitted.

> Why is bailing out a compay different from "investing" in it? What is an investment besides a non-emergency bailout? Bailing a company out is just a euphemism for making a very high risk investment that the market is unwilling to do. Putting aside whether that is the correct thing to do or not, the option would likely (in a recession) be mass unemployment, so there's an incentive from the state, that likely wishes…

Okay, but why is buying a company's stock not the same as bailing it out? If you're "investing" in the business, why does money have to be given to them directly, using a completely different mechanism?

"Bailing [a company] out" implies severe issues with the financing of the company, and that without that investment the company would go under. I'm not sure what you mean by "a completely different mechanism", a bailout can definitely happen through acquiring stocks in that company.