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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

#91

Post by sokoloff »

nabla9 wrote: post #49

.. or dividends as the article says. Devil is in the details. Maybe French government has good conditions for the aid, but the article is not giving details. Aid should be exchangeable debt for public companies. No dividends and buybacks. No executive bonuses or options until the debt is paid full. After (5-7) years the remaining debt is exchanged into company stocks in a rate that leaves the government in the neutra…

Presumably companies with strong finances and other options for financing would not want to take on shareholder-unfriendly terms like a multi-year ban on paying dividends or doing buybacks.

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

#92

Post by lucian1900 »

adwn wrote: post #89
sametmax wrote: post #79

Earlier quoted context omitted.

> One difference between them is that a dangerous concentration of power is inherent to communism You mean in opposition to a system that promotes the concentration of capital, which is power ? Or do you think non capitalist systems don't have laws and a group of dictators must be at the top?

> Or do you think non capitalist systems don't have laws and a group of dictators must be at the top? Empirically, for 100% of the sample size, socialist systems always turned into dictatorships after a few years at most.

That is indeed what US and Western European media have been repeating for decades. It doesn’t necessarily match the people’s experience.

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

#93

Post by rorykoehler »

bradleyjg wrote: post #86
rorykoehler wrote: post #82

Earlier quoted context omitted.

Lean times are absolutely the worst time to issue new shares though. The downward trend could spiral out of control if that was put into practice.

For that reason business managers may want to hold on to cash rather than buying back shares and investors may want to buy shares in companies run by such managers. If we bail out all the grasshoppers then what incentive is there to be an ant?

Absolutely agree but a middle ground is to regulate this kind of behavior out.

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

#94

Post by sokoloff »

eloisant wrote: post #31
WalterBright wrote: post #18

Earlier quoted context omitted.

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 g…

Qualified dividends (most of them) are taxed the same way as long/term capital gains in the US.

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

#95

Post by em500 »

Havoc wrote: post #73

Could someone explain the sudden anger at share buybacks to me? Media seems to portray it as some sort of evil trick, but I don't see it. It's not that different from distributing divs

There are some tax and option-price related differences between dividends and buybacks in normal times, but for most of the current discussions those differences are irrelevant.

I agree that some of these recent stories about evil buybacks feels like fabricated outrage. For requesting state aid, buybacks are largely the same as dividends: if you need public support, you should definitely not do buybacks after that, just as you should pay dividends.

Whether you believe they shouldn't have done buybacks in the past, ever, should not be much different than whether they should have paid out dividends in the past. Higher level, it's about what kind of equity buffers companies should retain in normal times.

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

#96

Post by FactolSarin »

adwn wrote: post #89
sametmax wrote: post #79

Earlier quoted context omitted.

> One difference between them is that a dangerous concentration of power is inherent to communism You mean in opposition to a system that promotes the concentration of capital, which is power ? Or do you think non capitalist systems don't have laws and a group of dictators must be at the top?

> Or do you think non capitalist systems don't have laws and a group of dictators must be at the top? Empirically, for 100% of the sample size, socialist systems always turned into dictatorships after a few years at most.

Empirically, there are plenty of democratic socialist countries

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

#97

Post by tialaramex »

imtringued wrote: post #75
Mengkudulangsat wrote: post #45

Earlier quoted context omitted.

The rage against buybacks is how many are funded - through debt. Boards are gearing their companies to the hilt to fund shareholder returns (in whatever form), to the point the ship itself is rendered unable to whether significant storms. If bailouts are normalized, there is no disincentive against such reckless behavior. I would like there to be permanent cash buffers to fund 1 year HR costs before any form of share…

Your company makes 2 million profit per month. You don't want to sit on the cash for 12 months just to pay out 24 million, you want to give the money to shareholders immediately. That's a pure liquidity problem so the answer is to just get a dirt cheap loan.

In a year's time, weirdly there isn't 24 million cash profit to pay off the "cheap loan" and the company go bankrupt. In hindsight it's obvious the "profit" was illusionary. Your million dollar "performance" pay for orchestrating this is securely in your personal bank account, the auditor's million dollar "consultancy fee" in theirs, and employees, the tax man, and shareholders are left with nothing. Yet another "success" for capitalism.

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

#98

Post by sokoloff »

patall wrote: post #35
pianom4n wrote: post #25

Earlier quoted context omitted.

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 ...

So are LTGCs from the shareholders who sold. Someone is paying the capital gains tax; it’s just not the people who stayed invested.
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