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

211–220 of 220 posts

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

#211

Post by ardy42 »

rorykoehler wrote: post #82
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.

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.

> 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.

Yeah, but that's kinda the point. If a company wants to buy high, sell low, that's their choice. But if they want to waste their cash buying high (and dodging taxes on dividends), they shouldn't expect to be able to successfully get easy money from the public when they need it.

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

#212

Post by gdhbcc »

8fingerlouie wrote: post #114
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?

Shareholders are already on the hook. The way shares work is a way for a publicly traded company to obtain a loan. It does this by issuing shares which can be bought by investors. Shareholders are not liable except for their initial investment. After selling shares, these can be traded i.e. on NASDAQ, but any price on the shares there only reflects the public perception of value of any given company. It's a high risk…

Thats not true at all, companies are in no way obligated to pay dividends

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

#214

Post by tim333 »

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?

Macroeconomics. Normally they are but when there is a huge shock to the economy like now they don't have the money to bail everyone at once hence either the government steps in or else companies fold and many lose their jobs unnecessarily.

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

#215

Post by tim333 »

I'm not sure "can't buy back shares" is the right policy economically. Buying back shares is just a way to give profits to shareholders like paying dividends or similar.

What they should do is companies benefiting from state aid have to give a lot of shares or options to the state in return. Maybe near 100% in bad cases.

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

#216

Post by triceratops »

smaryjerry wrote: post #157
skewart wrote: post #133

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. A popular counter-argument is that governments should plan to spend money on unemployment relief for individuals if it looks like a lot of big companies won’t make it. Let companies fail but cushion the blow for people affected.

Unemployment relief is a temporary solution because people are usually single skilled. For example an airplane engineer doesn't easily get a new job in another industry.

Wouldn't former AA employees find jobs in the new company formed by whoever bought up the assets formerly owned by AA? Why would they need to change industries? The need for airlines won't go away.

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

#217

Post by donavanm »

gwd wrote: post #77
pjc50 wrote: post #17

Earlier quoted context omitted.

I agree with the first sentence but not the second; buybacks aren't "stealing from the market", they're returning money to the market but "stealing" from the revenue service . The tax treatment of dividends is less favourable. Executive total compensation is a wider problem, but shareholders seems generally satisfied with letting boards have almost as much of the company money as they want. Only people who really tak…

> The tax treatment of dividends is less favourable. They changed this a while back, didn't they? "Qualified dividends, on the other hand, are taxed at the capital gains rates, which are lower." [1] AFAIK the only tax advantage of dividends now is that you're forced to pay tax every year, rather than being able to pay tax only once when you actually sell your shares. (Do let me know if there's something I'm missing.)…

It’s a big difference in practice. Dividends force a taxable event. The event may also force those dividends to be treated as income. The buyback increases the value of held assets. By choosing when to sell you can control the tax rate, the realize gains or losses, and time it in conjunction with other gains/losses to minimize the total tax burden. Those are very real opportunity costs.

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

#218

Post by donavanm »

endorphone wrote: post #163
mcv wrote: post #10

Earlier quoted context omitted.

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 co…

Don’t forget that the total free cash flow returned via buybacks and dividends wouldn’t have been enough even if they had chosen for inefficient allocation of capital.

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

#219

Post by modo_mario »

smt88 wrote: post #72
sametmax wrote: post #58

Earlier quoted context omitted.

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…

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.)

It's not so much intentional. In theory the whole vanguard party thing inherent to Leninism & derived political philosophies is supposed to precede communism by first establishing a developed socialist society. The communist society is supposed to be stateless. The vanguard party generally becomes a corrupted authoritarian mess and never gets close to the theory defined goal but that is not a defined intent for these political theories. One could say that often enough this is because it fails to retain consistent democratic control, faces external opposition and locks down even internal democratic processes[1]. Marx did however allow for peaceful transition in countries with strong democratic institutional structures. (I believe he mentioned the US, UK and Netherlands.) and I suppose a communist could argue against the likelihood of such regression in such a scenario tho that seems doubtfull imo.

[1]https://en.wikipedia.org/wiki/Dictatorship_of_the_proletaria...

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

#220

Post by wcarron »

cutemonster wrote: post #206
wcarron wrote: post #197

Earlier quoted context omitted.

> Buy back shares, return capital to shareholders, and let shareholders invest in something else. Or GE could invest in increasing wages, particularly for the lowest-paid workers. Return capital to the actual producers of the capital.

That'd permanently increase the expenses and reduce the dividends and stock value? (So maybe therefore the CEOs won't increase the wages unless people start resigning?)

Yeah, it's called investing in your employees. It is growth, just not for shareholders. Shareholders do not have a divine right to all the benefits a company can produce.

Stocks/dividends/buybacks are a system designed to capture all profits. No surprise and nothing really wrong there, but what annoys me is that shareholders like to pretend that __unless all profit goes into dividends/buybacks, it's a waste and a sign that the company is making poor decisions__, which is not the case. It does not take into account the lives of employees beyond the cost to company. That is also a perfectly reasonable investment for a company to make and, in fact, is one that it has a duty to invest in.

Stock value is reduced because petty shareholders refuse to acknowledge that workers deserve growth from company profit just the same as they do.

Post reply on HN