Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

uk.reuters.com

Post reply on HN
Print view View original

61–70 of 220 posts

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

#61

Post by londons_explore »

tsimionescu wrote: post #27
jylam wrote: post #19

Earlier quoted context omitted.

In French : https://www.lemonde.fr/economie/article/2020/03/28/le-gouver... "Enfin, les employeurs bénéficiant du dispositif de chômage partiel, lui aussi financé sur crédits publics, sont appelés à « la plus grande modération » en matière de dividendes."

You omitted the important parts: > Toutes celles qui auraient bénéficié de reports de charges sociales ou fiscales et qui auraient versé des dividendes se verront obligées de rembourser cette avance de trésorerie sur les charges sociales et fiscales, avec une pénalité d’intérêt. So, he asked the all companies whose employees are being partially payed by the state to be very moderate in paying dividends. But they will…

assuming that investment is at an uncommercial nice low interest rate, the companies have just been given a nice option there...

Ramp up risk in your businesses operations, and you'll either make a lot of profit or loss. If you make profit, pay back the governments loan and give the rest to shareholders. If you make a big loss, close up shop and the government looses out.

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

#62

Post by hnarn »

bradleyjg wrote: post #57
hnarn wrote: post #48

Earlier quoted context omitted.

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.

I may be a bit daft here but in what way is this related to the work of accountants? The number isn't wrong, there's just context that's easily missed. The "buyer beware" logic can be used for a lot of things ad infinitum, you could argue the same thing about a company straight up lying about certain sales possibilities etc. but that would legally be fraud, so it's not black and white.

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

#63

Post by btrask »

hnarn wrote: post #60
btrask wrote: post #56

Earlier quoted context omitted.

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.

What I mean is, simply buying a company's stock does not immediately benefit them. They have to issue new shares to turn their elevated stock price into cash. So if companies simply issued shares, they could raise money and effectively undo all of the buybacks they did. Problem solved, right?

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

#64

Post by [deleted] »

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?

[deleted]

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

#65

Post by hnarn »

btrask wrote: post #63
hnarn wrote: post #60

Earlier quoted context omitted.

"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.

What I mean is, simply buying a company's stock does not immediately benefit them. They have to issue new shares to turn their elevated stock price into cash. So if companies simply issued shares, they could raise money and effectively undo all of the buybacks they did. Problem solved, right?

Yes, assuming anyone will buy the stocks, and at the price you want them to...

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

#66

Post by ajsnigrutin »

fock wrote: post #47
ajsnigrutin wrote: post #34

Earlier quoted context omitted.

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 dese…

can you explain to me, why we can not regulate the very same companies in the good times then?

In good times, companies work "at capacity" and all the problems are between the owners and the managers. If managers fsck up, the owners will deal with them, or lose their own money. If something fails, people will still excpect those products, other companies will take the workers, etc. (so if you're a pilot, AA goes under, people will still need to travel, so other companies will need more pilots). In the time of crisis (like now), (almost) noone flies, and no company needs pilots (neither their own, nor new employees). In some countries (eg. mine, slovenia), the government has also forbiden flights (and other modes of public transport). In this case, where you have a successful company, and the government says you're not allowed to do your core business, but also not allowed to lay off employees, and they still expect all the taxes, dues and paycheks paid, ...'something' has to be done (either bailouts, or special laws (like here now), where you don't have to pay some government fees, can put workers to "wait for work" (less pay, but still employed), etc.).

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

#67

Post by mxcrossb »

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…

There’s thinking long term, and then there’s thinking “what if the government shuts down the economy over a once in a hundred year pandemic?” There might not even be an airline industry next time this happens. I honestly think it’s totally unreasonable for the public to limit the finger at these companies and said “you should have planned”

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

#68

Post by btrask »

hnarn wrote: post #65
btrask wrote: post #63

Earlier quoted context omitted.

What I mean is, simply buying a company's stock does not immediately benefit them. They have to issue new shares to turn their elevated stock price into cash. So if companies simply issued shares, they could raise money and effectively undo all of the buybacks they did. Problem solved, right?

Yes, assuming anyone will buy the stocks, and at the price you want them to...

Well, they can keep issuing stock until their share price hits $0.00. If they still need money, then maybe the state can step in and start buying some.

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

#69

Post by dragonwriter »

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…

> Bailing a company out is just a euphemism for making a very high risk investment that the market is unwilling to

That depends on the particular form of bailout, which can anything from equity/debt financing as you describe, to a one-off form of bankruptcy, to an outright gift of funds, and often combines elements of all three.

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

#70

Post by Taniwha »

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?

Plain buying a company's shares gives no money to the company, just to its shareholders

Buying new shares from the company in exchange for bailout money dilutes the value of existing shares (not necessarily a bad thing, the investors bet on a company that wasn't prepared for such a downturn). Of course companies that have done stock buybacks could sell stock on the open market with roughly the same effect.

Buying debt from a company likely means future dividends will be lower, share prices are also likely to go down.

Plain bailing out a company with no payback is essentially an investment in jobs and a healthy economy, I can't see any reason why at the very least it shouldn't be exchanged for equity.

Of course in all these cases it's all of us who are doing this collectively (very socialist!) we should expect that companies that are bailed out by the taxpayers repay their bailouts eventually, from that point of view investing in companies that don't pay their fair share of taxes (by playing accounting games, moving profits offshore etc) are particularly poor investments

Post reply on HN