If you don't want the capital, then don't sell your shares. Some tech companies sit on a mountain of cash for a reason...some investors do not want dividends and it can actually drive share price down. We have an economic system that is structured to loot the public treasury every decade and leaves out large swathes of the country, and…
If you don't want the capital, then don't sell your shares. Some tech companies sit on a mountain of cash for a reason...some investors do not want dividends and it can actually drive share price down. We have an economic system that is structured to loot the public treasury every decade and leaves out large swathes of the country, and world for that matter. I just don't get the focus on share buybacks. It is like shouting and stomping your feet about dirty forks on the Titanic. If you want proof how inconsequential this issue is... why would political leaders pay any attention to share buybacks if they were really a structural problem. Matt is generally better at focusing on core issue.
[see my comment above...] If I sell my shares, that lowers their price. So I get squeezed. Declaring a dividend, all else equal, makes a stock more attractive- unless the market sees it as looting the company of cash. Just because the dividend mechanism can be abused, doesn't make the buyback any more kosher.
I would dispute your first assumption. An individual selling his or her stock shouldn't impact the market capitalization. And declaring a dividend in all cases does not make the share price go up. In some cases, share prices go down between the declaration date and the ex-dividend date. Both a dividend and share buyback are methods of returning capital to shareholders and in and of themselves are not good or bad. As opposed to looting the public treasury which is bad...
Looting a publicly-owned corporation is also "bad". Boeing, as going concern, DOES affect national security.
No, an individual selling stock doesn't directly "impact market capitalization". That was not my statement. I said, all else equal, it affects price. All else is never equal, price goes up or down depending on the totality of factors. The impact can't be quantified, but it exists. What Taibbi argues is NOT that buybacks or dividends bad. He shows that the aggreagate effect of buybacks is harmful to many.
Boeing is a publicly owned enterprise, i.e. it is not owned by the government. Corporations exist for one reason only... to increase the wealth of their owners. If policy makers think that our country needs an airplane manufacturer for national security purposes, then they should start one from scratch or buy one. I don't want to state the obvious, but I am sure you understand that market price per share * # shares outstanding = market capitalization.
'Boeing is a publicly owned enterprise, i.e. it is not owned by the government. Corporations exist for one reason only... to increase the wealth of their owners."
Your terms are more relative than you might think. If the government doesn't operate and regulate the stock market, (and, sadly, offer an implied bailout) "publicly-owned" shares becomes worthless paper 'assets". Government must pay for the bankruptcy administration. Government must enforce Boeing's patents. Government must print, and back with full faith and credit, the currency used to trade shares in Boeing. Government must inspect the planes and help build airports so that the flying public can trust Boeing with their lives. Would you trust a profit-maximizer in a scheme with no FAA?
Boeing is free to go private, like, say, Chrysler. But if they want to keep borrowing money as a public company, they have to comply with SEC rules. Chrysler and Boeing are free to operate as partnerships or individuals. But if they want limited liabilty protection they must abide by corporate law.
"Boeing is a publicly owned enterprise, i.e. it is not owned by the government."
Well, let's parse that one, because I was under the impression that we the people, who empower the government, also constitute "the public". Usually, the "i.e.," in a sentence like yours distinguishes between public companies and private enterprises... not government-owned versus publicly-.
Can a receiver in bankruptcy, appointed by a "judge" (technically a magistrate or referee) make planes fast enough and reliable enough to secure our borders? (Apparently Boeing's new commercial model isn't so reliable, so maybe the bar is low...). What if the bond vigilantes take control? Do they value cash or national security? If the assets go to auction, can Russian or Chinese or Saudi sovereign wealth funds bid through proxies? No one wants to bail out Boeing's bag/shareholders with tax dollars, but..."national security"... is complicated. Just look at the fog over the application of the Defense Production Act to ventilators...
In a perfect world of rational economic men, maybe the government should be forced to start up, or buy out, an "essential" airplane manufacturer. At the very least, take it as eminent domain, paying "just compensation"- in Constitutional language. Why not tax foreclosure- just raise the corporate rate...
But if the unions feel fucked over by the bankruptcy "judge"-rightly or wrongly- maybe because they stupidly held onto a few shares in 401k's while fatcow executives flew golden parachutes in the buyback years (GM, GE, et al), or maybe because the receiver works from home while the riveter risks COVID, or just because "union" is a dirty word in the corporate media...do the planes secure the borders?
When a company buys backs stock that reduces the shares outstanding. All else equal, that must act to increase the price per share (hypothetically "ex-buyback") and tend to reduce market cap, because cash moves out of the company. A company with less cash should be worth less, but the aggregate of all factors set price and cap. For example, the "market" may perceive a company that buys back stock as prudent, profitable, a "buy"... Or, if the market sees it as management looting, the price may drop.
But if a company instead declares a cash dividend, the number of shares outstanding is untouched (ex-options exercised as a result, assuming they are redeemed with new, diluting shares). Cash goes out, so the company is theoretically less valuable- unless the market sees the dividend yield as a good sign. Same "good or bad" potential as the buyback, as a management decision, but huge tax implications for sellers versus unqualified dividend payees. Also forces investors to retain full risk if they want to retain a vote- they must divest instead of collecting some rent. Note that by the forced selling they are squeezed. Management already has a huge say in management, by definition...and they can always write themselves new options... So they don't sweat the proxy count. Devil in the details. Finally, huge or one-time dividends call attention to possible looting/manipulation. Next Q they probably have to cut or eliminate, which is always trouble (no matter how much they disclaim the "one time" bounty)... The buyback is more opaque. It may appear to the suckers to be cap neutral (cash still goes out, but shares become more scarce). Just read these comments to see the confusion...
If you don't want the capital, then don't sell your shares. Some tech companies sit on a mountain of cash for a reason...some investors do not want dividends and it can actually drive share price down. We have an economic system that is structured to loot the public treasury every decade and leaves out large swathes of the country, and world for that matter. I just don't get the focus on share buybacks. It is like shouting and stomping your feet about dirty forks on the Titanic. If you want proof how inconsequential this issue is... why would political leaders pay any attention to share buybacks if they were really a structural problem. Matt is generally better at focusing on core issue.
[see my comment above...] If I sell my shares, that lowers their price. So I get squeezed. Declaring a dividend, all else equal, makes a stock more attractive- unless the market sees it as looting the company of cash. Just because the dividend mechanism can be abused, doesn't make the buyback any more kosher.
I would dispute your first assumption. An individual selling his or her stock shouldn't impact the market capitalization. And declaring a dividend in all cases does not make the share price go up. In some cases, share prices go down between the declaration date and the ex-dividend date. Both a dividend and share buyback are methods of returning capital to shareholders and in and of themselves are not good or bad. As opposed to looting the public treasury which is bad...
Looting a publicly-owned corporation is also "bad". Boeing, as going concern, DOES affect national security.
No, an individual selling stock doesn't directly "impact market capitalization". That was not my statement. I said, all else equal, it affects price. All else is never equal, price goes up or down depending on the totality of factors. The impact can't be quantified, but it exists. What Taibbi argues is NOT that buybacks or dividends bad. He shows that the aggreagate effect of buybacks is harmful to many.
Boeing is a publicly owned enterprise, i.e. it is not owned by the government. Corporations exist for one reason only... to increase the wealth of their owners. If policy makers think that our country needs an airplane manufacturer for national security purposes, then they should start one from scratch or buy one. I don't want to state the obvious, but I am sure you understand that market price per share * # shares outstanding = market capitalization.
'Boeing is a publicly owned enterprise, i.e. it is not owned by the government. Corporations exist for one reason only... to increase the wealth of their owners."
Your terms are more relative than you might think. If the government doesn't operate and regulate the stock market, (and, sadly, offer an implied bailout) "publicly-owned" shares becomes worthless paper 'assets". Government must pay for the bankruptcy administration. Government must enforce Boeing's patents. Government must print, and back with full faith and credit, the currency used to trade shares in Boeing. Government must inspect the planes and help build airports so that the flying public can trust Boeing with their lives. Would you trust a profit-maximizer in a scheme with no FAA?
Boeing is free to go private, like, say, Chrysler. But if they want to keep borrowing money as a public company, they have to comply with SEC rules. Chrysler and Boeing are free to operate as partnerships or individuals. But if they want limited liabilty protection they must abide by corporate law.
"Boeing is a publicly owned enterprise, i.e. it is not owned by the government."
Well, let's parse that one, because I was under the impression that we the people, who empower the government, also constitute "the public". Usually, the "i.e.," in a sentence like yours distinguishes between public companies and private enterprises... not government-owned versus publicly-.
Can a receiver in bankruptcy, appointed by a "judge" (technically a magistrate or referee) make planes fast enough and reliable enough to secure our borders? (Apparently Boeing's new commercial model isn't so reliable, so maybe the bar is low...). What if the bond vigilantes take control? Do they value cash or national security? If the assets go to auction, can Russian or Chinese or Saudi sovereign wealth funds bid through proxies? No one wants to bail out Boeing's bag/shareholders with tax dollars, but..."national security"... is complicated. Just look at the fog over the application of the Defense Production Act to ventilators...
In a perfect world of rational economic men, maybe the government should be forced to start up, or buy out, an "essential" airplane manufacturer. At the very least, take it as eminent domain, paying "just compensation"- in Constitutional language. Why not tax foreclosure- just raise the corporate rate...
But if the unions feel fucked over by the bankruptcy "judge"-rightly or wrongly- maybe because they stupidly held onto a few shares in 401k's while fatcow executives flew golden parachutes in the buyback years (GM, GE, et al), or maybe because the receiver works from home while the riveter risks COVID, or just because "union" is a dirty word in the corporate media...do the planes secure the borders?
"Corporations exist for one reason only... to increase the wealth of their owners."
Legally speaking, corporations exist for one reason: to secure limited liability for their shareholders and officers.
The duty to maximize profits for owners is an agency requirement applying to any fiduciary- corporate or otherwise.
When a company buys backs stock that reduces the shares outstanding. All else equal, that must act to increase the price per share (hypothetically "ex-buyback") and tend to reduce market cap, because cash moves out of the company. A company with less cash should be worth less, but the aggregate of all factors set price and cap. For example, the "market" may perceive a company that buys back stock as prudent, profitable, a "buy"... Or, if the market sees it as management looting, the price may drop.
But if a company instead declares a cash dividend, the number of shares outstanding is untouched (ex-options exercised as a result, assuming they are redeemed with new, diluting shares). Cash goes out, so the company is theoretically less valuable- unless the market sees the dividend yield as a good sign. Same "good or bad" potential as the buyback, as a management decision, but huge tax implications for sellers versus unqualified dividend payees. Also forces investors to retain full risk if they want to retain a vote- they must divest instead of collecting some rent. Note that by the forced selling they are squeezed. Management already has a huge say in management, by definition...and they can always write themselves new options... So they don't sweat the proxy count. Devil in the details. Finally, huge or one-time dividends call attention to possible looting/manipulation. Next Q they probably have to cut or eliminate, which is always trouble (no matter how much they disclaim the "one time" bounty)... The buyback is more opaque. It may appear to the suckers to be cap neutral (cash still goes out, but shares become more scarce). Just read these comments to see the confusion...