U.S. airlines want a $50B bailout. They spent $45B buying back their stock • Hacker News Board

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#11

Post by peterbraden » Tue, Apr 07, 2020, 4:44 PM UTC

brockwhittaker wrote: post #8

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

Traditionally you also have dividends as well. Stock buybacks are basically tax avoidance.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#12

Post by jm20 » Tue, Apr 07, 2020, 4:44 PM UTC

I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buying back their stock as they were cutting flights and laying off employees. No business is going to hoard 50 billion dollars in an emergency fund for a pandemic that cuts 90% of revenue, that's just absurd.

The reality of the situation is that these airlines employ a lot of people and enable even more commerce and economic activity through their operation. You can disagree with a bailout all you want, but if they go under, the economy most likely suffers by a lot more than $50B.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#13

Post by billylindeman » Tue, Apr 07, 2020, 4:44 PM UTC

brockwhittaker wrote: post #8

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

4. Pay a dividend

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#14

Post by johnbrodie » Tue, Apr 07, 2020, 4:45 PM UTC

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

The most convincing argument I've heard is centered around just how much cash flow and expenses goes through the airlines on a daily basis, meaning they'd need some extraordinary amount of cash in the bank to weather something unprecedented like this. If they _did_ have that much cash, it'd be bad for the economy since that capital is effectively "locked up". Instead, give the proceeds back to the shareholders that will likely do something else with it - invest in new businesses, buy more goods and services, etc. I don't have any links handy, but Ross Perot railed against companies hoarding cash for decades.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#15

Post by christiansakai » Tue, Apr 07, 2020, 4:45 PM UTC

ComputerGuru wrote: post #2

Just remember that the Federal government ended up making money on the automaker and bailouts (quite apart from all the jobs that were saved).

Can you elaborate more? I'm curious on this.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#16

Post by gfrff » Tue, Apr 07, 2020, 4:45 PM UTC

Seems like they should sell the government 50 billion dollars of stock at the lower of current prices and 90% of the stock price at the time they did the buy back. They'll have lost money on the buybacks. They'll stay in business though.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#17

Post by dustingetz » Tue, Apr 07, 2020, 4:45 PM UTC

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

interest rates have been so low that biggest players have infinity money and nowhere to invest it ... which also explains venture capital activity of the last decade

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#18

Post by sroussey » Tue, Apr 07, 2020, 4:45 PM UTC

brockwhittaker wrote: post #8

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

4. Dividends

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#19

Post by adjkant » Tue, Apr 07, 2020, 4:46 PM UTC

brockwhittaker wrote: post #8

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

4. Increase pay/benefits to your rank and file employees for helping you get so much cash

5. Invest back in the business at reasonable levels so as to keep enough cash for an emergency fund

6. Focus on improving world impact through starting philanthropic activities

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#20

Post by seiferteric » Tue, Apr 07, 2020, 4:46 PM UTC

ceejayoz wrote: post #10

brockwhittaker wrote: post #8

Earlier quoted context omitted.

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

"Keep it in cash" isn't looking like such a bad idea right now.

Having just finished "Black Swan" I am convinced companies need to start thinking that these "once in a lifetime" events are actually pretty common. Having cash on hand to weather a storm should be mandated by shareholders.