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Denmark: No aid for companies which pay out dividends or are reg. in tax havens

bloomberg.com

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Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#271

Post by bzbarsky »

toomuchtodo wrote: post #65
bzbarsky wrote: post #63

Earlier quoted context omitted.

Almost no one keeps 12 months of cash reserves. Apple, with is famous cash hoard, is around that mark.... I can't think of other large companies offhand that are.

That was only used as an example as the other extreme. Edit: Very few business have that cash on hand, but will usually have access to credit revolvers that could carry them through this. I am aware of many firms that have drawn down their entire revolver.

And I'm aware of a bunch of companies that are explicitly not drawing on their available revolvers because the banks involved are not necessarily in a position to provide that liquidity right now... This is the issue with a systemic problem that affects the entire economy, which is quite different from a single company being affected. And note that even "cash on hand" would be in practice money markets or bank accounts, which would make drawing it down look a lot like a bank run.

Now whether we should be bailing companies out, that's a separate question.

Fundamentally, if 2020Q1/Q2 GDP is effectively down 30% or whatever the number is, and we want to "replace" that loss, it's hard to see where that sort of money can come from except "all of us" in various forms (higher taxes due to government bailouts, higher prices, higher inflation, etc, etc). The main question is where the incidence of the economic pain will fall. Letting companies go out of business places that incidence partially on the shareholders and partially on the ex-employees and partially on the ex-customers. Unemployment insurance and the like can partially help the employees in the short term. The shareholders seem to get little sympathy, understandably, though note that they include things like pension funds and whatnot. Customers (who can no longer get the goods the company used to provide) may be just out of luck or other companies might at some point spring up to address the demand. In the short term they are just out of luck.

It seems to me that a lot of economic readjustment will take place no matter what, with open questions about speed and smoothness.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#272

Post by MiroF »

Saaster wrote: post #148
MiroF wrote: post #90

Earlier quoted context omitted.

> Companies that pay dividends or make share buy-backs are more vulnerable in a crisis All public companies are anticipated to pay dividends or buy-back at some point in time, it's what underlies stock pricing.

And they can definitely still do that. AFTER they've paid back the state aid they received.

I don't think we disagree? Just disagreeing that there are two types of public companies, "those that do or will pay dividends" and "those that don't" since the latter group doesn't actually exist.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#273

Post by rpiguy »

sfkdjf9j3j wrote: post #225
rpiguy wrote: post #219

Earlier quoted context omitted.

There are 30.2 million small businesses in the US, which comprise a whopping 99.9% of all United States businesses and make up for the lion's share of employment. This is very different from Europe. By bailing out the small business owners, you have a better chance at maintaining employment or for employment to re-emerge after a crisis. Small business ownership is also a huge source of middle class wealth here in the…

Those stats are a little misleading. Only 18% of employees work at businesses with fewer than 20 employees. And of course most businesses are smaller - it's a lot easier to spend an afternoon filling out "LLC in a box" forms than it is to create a "large" business!

Well I would include larger private companies in that group, you could have 100 employees and still be a small business - for example you could own a small chain of restaurants or franchises, or several hair salons.

But yes really small businesses employ about a fifth of the population.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#274

Post by soperj »

mrep wrote: post #201
soperj wrote: post #128

Earlier quoted context omitted.

Berkshire Hathaway has only paid 1 dividend ever (in 1967). Buffett can invest that money better than I can, so why bother taking money out of the company.

But they have been buying back their stock which is effectively paying out a dividend with automatic reinvestment.

barely. It's not something they do regularly.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#275

Post by akiselev »

londons_explore wrote: post #75
kilo_bravo_3 wrote: post #28

Earlier quoted context omitted.

There's a lot of misinformation about this out there. The article does a bad job at explaining it, but companies that take aid cannot pay dividends or buy back stock until they return the aid. This is so that aid is not redirected into the pockets of shareholders and is instead used to keep people employed. >The Government and all parties to the Parliament agree that the extended and extended fixed cost scheme introd…

So why don't these conditions apply to all the aid, not just the aid after 8.8 million dollars? Otherwise it seems ripe for my company to claim 7 million dollars of aid as unsecured loans, then pay out nice big dividends claiming you are in a strong financial position because you are forecasting lots of business next year, then in 2 years time when the loan repayments become due, go bankrupt.

I don't know if Denmark has similar laws but here in the US there are a lot of family businesses that have many family members who aren't officially on payroll. They're not doing anything shady because there are lots of exceptions to underage labor and minimum wage laws for family businesses. The businesses pay the owners (one member from each household usually) dividends who then distribute to the rest of the family. Many of these businesses are run by large families with strong ties with each other and their communities who act as their own social safety net. Many of them are also immigrants with a disaster mentality so they are the ones most likely to have a large nest egg for hard times. Excluding them from the loans because of their capital structure would be disastrous.

I think the $8.8 million is too high out of an abundance of caution but I can see the reasoning.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#276

Post by MiroF »

Mikeb85 wrote: post #185
wsc981 wrote: post #107

Earlier quoted context omitted.

The stock value can still rise. Apple didn't pay dividends for a large part of its existence, yet especially after the year 2000 it would have been a great stock to own. > Apple's long stretch of not paying any dividends reflected Jobs' opposition to them. During Jobs' second tenure at Apple from 1997 to 2012, the tech giant didn't pay a single dividend, even as its cash hoard ballooned to over $50 billion in 2011. "…

Literally the point of markets is for companies to eventually pay back investors. A market without buybacks or dividends is a ponzi scheme.

So many people who don't understand this.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#277

Post by Agathos »

chrisseaton wrote: post #126
Agathos wrote: post #114

Earlier quoted context omitted.

Suing your employer for wage theft because 1. They are still paying your salary, and 2. They are still granting you stock, but 3. They have suspended dividends on the shares you were granted seems like a reach. I'd definitely be interested in reading about it if someone actually tries it, though!

Not sure who you're replying to. I didn't mention suing anyone or any idea of wage theft.

You suggested paying a dividend was similar to paying employees. When throwaway2048 challenged this, you brought up stock-based compensation. Surely if such compensation (including dividends) was an obligation in the same way as wages, then the employee would have some recourse when it's interrupted. In other words, they could sue.

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#278

Post by efreak »

seneca wrote: post #241
lotsofpulp wrote: post #230

Earlier quoted context omitted.

> By bailing out the small business owners, you have a better chance at maintaining employment or for employment to re-emerge after a crisis. Why is the goal to maintain employment? Seems like the government wants to keep people on their little hamster wheels.

> Why is the goal to maintain employment? Seems like the government wants to keep people on their little hamster wheels. Well, common sense seems to suggest that we would want to have an operational economy again at some point. That generally requires there to be jobs available to people. What is the alternative to "their little hamster wheels", exactly?

Possibly giving the money directly to the employees, rather than paying their employers?

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#279

Post by ThomPete »

simongray wrote: post #177
ThomPete wrote: post #154

Earlier quoted context omitted.

Denmark is a tax haven itself though.

You're thinking of the Netherlands where the Dutch live ( https://en.wikipedia.org/wiki/Dutch_Sandwich ). Denmark is a different country, but they're often confused for one another by Americans.

I am Danish so I think I manage to not get confused :)

Re: Denmark: No aid for companies which pay out dividends or are reg. in tax havens

#280

Post by ThomPete »

drsim wrote: post #172
ThomPete wrote: post #154

Earlier quoted context omitted.

Denmark is a tax haven itself though.

I strongly doubt it. The corporate tax provisions are stricter than most developed economies. All indexes I've seen have Denmark pretty far down tax haven friendliness. Genuinely curious on your source.

Not for holding companies. It's a well known secret and is a way for the Danish government to lure in large international holdning companies.

No sure why people are downvoting me. I'm Danish and I do know the tax system pretty well.

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