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

#161

Post by tomatotomato37 » Mon, Mar 30, 2020, 2:50 PM UTC

bilbo0s wrote: post #156

batmenace wrote: post #136

Earlier quoted context omitted.

Monstly agree - but dividends that go to every owner aren't unfair per se, a cap on dividends would be very good, though. As for options, depending on the company they can be a hiring incentive, and not being able to grant any may restrict the company going forward - has to be evaluated carefully.

> but dividends that go to every owner aren't unfair per se If these companies are in such dire straits they need the infusion of cash provided by a government bailout, where did the money to pay dividends come from? Shouldn't they use that money to pay employees and fund their operations?

I've heard arguments for dividends/buybacks in the scenario where the government does a terrible job of picking companies that actually need a bailout and ends up throwing money at a healthy company, in which case the only way for that money to reach decent investment opportunities is for the company to pass on the money to its own investors in the form of buybacks and what not. I don't really agree with the concept since bailouts are supposed to be for keeping big domestic employers alive and not some 10 person juicero startup an ocean away but the money does eventually end up funding someone's job so it's not completely useless.

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

#162

Post by madhadron » Mon, Mar 30, 2020, 2:51 PM UTC

smaryjerry wrote: post #155

rorykoehler wrote: post #78

Earlier quoted context omitted.

It's basically rent seeking behavior if you taking public money and then using it to enrich yourself with no benefit to the public. That money could be 1) saved for a rainy day (like now) so they won't have to ask the public for money or 2) reinvested in the company to generate more value. As it is it just sucks value from the economy while also artificially increasing the stock price.

It does the opposite. Buybacks send that money directly back into the economy to the shareholders that sold.

Into the economy, perhaps, but not generally into circulation. Most shares are held by institutional funds or the wealthy, which is about the least useful place to put money for stimulus.

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

#163

Post by endorphone » Mon, Mar 30, 2020, 2:53 PM 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.

Zero companies receiving the bailout money are going to buy back stock with it. This whole charade is just a big feel good bit of nonsense for main street.

What people are complaining about is that previously these companies did buy backs. Boeing did buybacks (when they were profitable, though they cancelled them when the 737 MAX disaster began). The airlines did buybacks. Etc.

People are complaining that if these companies all sat on enormous war chests they wouldn't need help now. But that has never happened and will never happen like that because it would be ludicrously inefficient for the market at large.

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

#164

Post by joosters » Mon, Mar 30, 2020, 2:53 PM UTC

snarf21 wrote: post #129

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…

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 compani…

Companies (and their directors) care about the share price because their owners care about the share price, since they are the shareholders.

If the directors and bosses stopped caring about the share price, the shareholders would be more likely to kick them out and recruit some more co-operative people.

If you want companies to care less about share prices, you'll have to structure companies differently.

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

#165

Post by smt88 » Mon, Mar 30, 2020, 3:00 PM UTC

jimbob45 wrote: post #158

smt88 wrote: post #72

Earlier quoted context omitted.

Communism and capitalism do share a weakness: corruption of those with power. One difference between them is that a dangerous concentration of power is inherent to communism. It's intentional. In capitalism, it's an unintended consequence that can be mitigated by regulations (anti-trust laws, subsidies to startups, etc.)

Communism and capitalism are economic systems, not governmental systems. You can have a dictatorial capitalist system. You can have a democratic capitalist system. You can have a dictatorial communist system. You can have a democratic communist system.

> Communism and capitalism are economic systems, not governmental systems.

Radical economic egalitarianism implies a (strong) governmental system. If capital can be sold/transferred, capitalism (i.e. concentrated control of the means of production) will naturally recur. If capital cannot be sold/transferred, someone has to decide how it's distributed, and the only body that can do that is a (governmental) central planning authority. That gives the government enormous power, whether it's a dictatorship or not.

> You can have a dictatorial communist system. You can have a democratic communist system.

This is unrelated to what I wrote. The US is essentially an oligopoly, but it's also a democratic republic.

A governmental system is affected by the dynamics of the economic system. After many generations, the governmental system may be utterly different from what was originally established or intended (as is the case in the US).

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

#166

Post by sokoloff » Mon, Mar 30, 2020, 3:01 PM UTC

disiplus wrote: post #134

sokoloff wrote: post #98

Earlier quoted context omitted.

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

well, that's not how it should work or is intended. if my monthly paycheck is 13k eur before taxes and i live of 5k easily, i cannot say, take only 5k and pay taxes on that and for the other 8k give me stocks untaxed, and i will probably pay some tax when i sell the stocks (and different rules applay).

This is exactly how pre-tax retirement account contributions work in the US (albeit with limits in the $15K-$56K/yr range, rather than ~$100K/yr).

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

#167

Post by smt88 » Mon, Mar 30, 2020, 3:02 PM UTC

jahaja wrote: post #118

smt88 wrote: post #72

Earlier quoted context omitted.

Communism and capitalism do share a weakness: corruption of those with power. One difference between them is that a dangerous concentration of power is inherent to communism. It's intentional. In capitalism, it's an unintended consequence that can be mitigated by regulations (anti-trust laws, subsidies to startups, etc.)

What exactly is the historical basis that it's unintended? The origins of capitalism are hardly a display of democratic prowess.

While the ideal of capitalism -- the freedom of capital -- may not be everyone's ideal, its proponents often say that it also leads to the freedom of individuals. I disagree, but it's definitely possible to have a regulated capitalist society with high levels of individual prosperity and freedom (e.g. Denmark).

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

#168

Post by zentiggr » Mon, Mar 30, 2020, 3:02 PM UTC

anticensor wrote: post #74

raphaelj wrote: post #2

That makes sense. But what about prioritising partial nationalisation of these companies by injecting cash in exchange for shares? That way it would have no impact on the net public debt, as the gouvernement assets increase at the same rate as the debt.

> gouvernement French detected. We spell it as "government" in English.

And "regering" in Swedish...

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

#169

Post by marcosdumay » Mon, Mar 30, 2020, 3:02 PM UTC

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?

I'm not in France either, but it looks like it's newsworthy exactly because some government is doing something right for once.

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

#170

Post by mrep » Mon, Mar 30, 2020, 3:04 PM 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.

No need to predict, that is a precondition for the US airline bailouts: "Airlines receiving aid will also be prohibited from buying back shares of their own stock for a year after the loan is fully paid off and bars them from issuing dividends to shareholders while receiving aid" [0].

[0]: https://www.businessinsider.com/airlines-coronavirus-bailout...