Much was learned from the banking crisis bailouts and good to see the French are mindful of that and addressing such issues that caused public outrage (rightly so) in a way that will curtail such abuse.
French companies benefiting from state aid can't buy back shares
121–130 of 220 posts
Re: French companies benefiting from state aid can't buy back shares
#122Earlier quoted context omitted.
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…
Raising the value of a stock doesn’t make the shareholders money unless they sell their holdings (although it might incentivize doing that) as compared to dividends which encourage holding on to your investments so long as they pay out nicely. The real beneficiaries of buybacks are executives and employees with vested stocks. They both lose money on dividends and directly benefit from the contraction in available sha…
Dividends would also go up if there are fewer stocks and the same profit, no?
Re: French companies benefiting from state aid can't buy back shares
#123Investors need to change our market valuation attitude and stop expecting that companies jeopardize their operations/stability so that they give us pennies from their cashier forever. Public companies should not be allowed to pay dividends/buybacks or in other terms to use their savings to keep paying in perpetuity fictional obligations. The initial investors (who are the only ones that physically put money in the balance sheet of the company), are being rewarded by the increase of the share price (like Amazon, Google etc). The shareholders that are coming later, are being rewarding by holding something of value, and their participation in the board can increase/decrease this value. The value of a share of a profitable company will never go to zero, the same way that gold has non-zero value (they are finite).
What will happen with that excess money? Option 1 (The capitalist) : Trust the companies that they will handle them properly by planning for a rainy week (apparently nobody does), or investing in their business. Option 2 (The socialist) : Tax heavily the earnings and redistribute them in democratically approved way.
Re: French companies benefiting from state aid can't buy back shares
#124Earlier quoted context omitted.
> 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
For example?
Re: French companies benefiting from state aid can't buy back shares
#125Earlier quoted context omitted.
Raising the value of a stock doesn’t make the shareholders money unless they sell their holdings (although it might incentivize doing that) as compared to dividends which encourage holding on to your investments so long as they pay out nicely. The real beneficiaries of buybacks are executives and employees with vested stocks. They both lose money on dividends and directly benefit from the contraction in available sha…
Dividends would also go up if there are fewer stocks and the same profit, no?
Only if the company doing the buybacks pays out dividends in the first place. (UAL doesn’t.) But the cost of buying out those shares is significantly more than the slight increase in dividends yields in all cases.
Re: French companies benefiting from state aid can't buy back shares
#126If the government keeps bailing out large corporations, can this eventually form a pattern in which major corporations and industries may collectively and artificially engineer a crash or downturn event to game the system? Once any pattern is formed and determined, there are always some people who will attempt to exploit it, and those people are often the ones who would eventually ruin all the good things for everybo…
Not without severe repercussions in the market.
The dance between supply and demand in a market enforces a number of unavoidable consequences. When an outside influence artificially influences a change in one side, a contraction often occurs in the other. That reaction can often overcorrect. Theoretically, a small downturn in supply could cause a proportional contraction in demand as price rises. But what usually happens is the response is driven both by the proportion of downturn and a measure of future value confidence based on additional factors. Subtle changes can game the system a little, but every change carries an added risk of flight to substitutes.
At a low point, the ROI on trying to game market share or other factors quickly narrows.
Re: French companies benefiting from state aid can't buy back shares
#127I think if a company wants to buy back, now is the time.
Re: French companies benefiting from state aid can't buy back shares
#128Could 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
It's symbolic of short-termism. Instead of saving cash for emergencies or investing in new equipment, research or product lines, the cash is just 'wasted' on manipulating a share price in order to boost quarterly targets. A lot of the time, management is then rewarded for the increased share price, which doesn't necessarily reflect the performance of the business in terms of their ouput, number of widgets sold or wha…
You didn’t explain how this is different from dividends.
Re: French companies benefiting from state aid can't buy back shares
#129.. 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…
As others have said, make it convertible debt. It converts to voting shares. I actually like these conditions. If you need the money, you shouldn't be paying dividends or doing buybacks anyway. This real issue is that we need to ban C-suite and BOD compensation from using anything stock related. Then this perverse incentive for buybacks and quarterly numbers fades and people start focusing on building healthy companies.
Re: French companies benefiting from state aid can't buy back shares
#130Why 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?
Equity is by definition limited liability. It has to be. Imagine it’s not, and you own $100 of SPY. That means you indirectly are an Apple shareholder. Should you be responsible for Apple’s debts if they went bankrupt? If you were, how would that even work?