We may (justly) blame the problems of today on the culture change that the merger brought. But that gives us no way forward, and 27 years later, there's no way of un-scrambling the egg. To fix Boeing, we're going to have to start with the Boeing we have now.
There's no reason to complain about stock buy backs. Most profitable public companies should be returning a portion of those profits to shareholders through stock buy backs.
Only a company that is decrepit and unable to figure out how to invest in their own growth and improvement does buybacks. Actually investing is a far better for long term shareholdes. Once company uses buybacks accessibly, you know the management doesn't have it.
That is just completely wrong and displays ignorance of the basics of how capital markets work. Investors want to maximize their risk-adjusted rate of return. Even if a corporation still has some potential growth opportunities, investors may prefer to get their capital back so that they can invest in other more profitable ventures and they will exercise their votes accordingly.
And if you're certain that "management doesn't have it" and can convince enough other investors to provide funding then you can take over the entire company and run it as you see fit. Activist investors like Pershing Square Capital Management do this all the time, and despite some high profile failures on average they are very successful.
And there is fundamentally no major difference between paying dividends versus stock buybacks, just a matter of tax efficiency. It's sad to see people (who likely aren't even shareholders) complaining about buybacks without understanding that.
> That is just completely wrong and displays ignorance of the basics of how capital markets work. Investors want to maximize their risk-adjusted rate of return. Even if a corporation still has some potential growth opportunities, investors may prefer to get their capital back so that they can invest in other more profitable ventures and they will exercise their votes accordingly.
It's hilarious how you put these two sentences together completely ignoring the possibility of selling you shares on the open market if you "prefer to get your capital back". That's a real display of ignorance.
It's sad to see the level of aggressive ignorance on HN sometimes. Many investors prefer to have the capital returned through stock buybacks and/or dividends than sitting in a corporate treasury where it can potentially be squandered. The fact that investors can also sell their shares is irrelevant.
No they should not. Stock buybacks of such recklessness were not even legal until Reagan - for this exact reason. It's not good business when your stock is growing and your company is dying. In fact, it's just an accounting trick which is essentially vulture capitalism - but from the inside.
"The $11.8 billion Bed Bath & Beyond spent on its own stock since 2004 comes to more than twice the $5.2 billion in debt it had on its books in its most recent SEC filing, a debt load that proved crushing for the company. It left the company unable to buy the inventory required to create the sales it needed to reverse losses.
“The company’s stewardship of their capital failed,” said Declan Gargan, retail director and credit analyst who follows Bed Bath & Beyond for S&P Global Ratings."
Nonsense. If the shareholders prefer to take capital out instead of reinvesting in the business there's nothing wrong with that. And if businesses sometimes die as a consequence then so what. Individual businesses have no particular right to exist indefinitely.
The only reason that companies use stock buy backs instead of dividends to return capital to shareholders is double taxation. If Congress eliminated the double taxation then there would be little reason for stock buy backs.
Snarky complaints are cheap. What are you proposing exactly? Should people donate their capital to businesses and expect nothing in return? Should all businesses continue operating forever?
Again. This is why this used to be illegal. Why should the new shareholders have the right to destroy something others spent decades building? A successful company constantly provides sustainable returns, then a group comes in and says "that's enough, let's milk this cow until it dies. Thanks for doing the hard work! Also, to the shareholders that got screwed as the company stock crashes finally - too bad, play again".
When you own something that means you have the right to do pretty much whatever you want with it. That is the fundamental social contract with private property. If I want to buy a bunch of diamonds and smash them with a hammer then I can do that, regardless of whether you think it's a good idea.
Businesses fail for all sorts of reasons. Sometimes they get too aggressive with the capital structure and blow up. This is a feature, not a bug. While the experience may be painful for some stakeholders in the short term, over the long term this creative destruction unlocks latent value and increases economic growth.
And if old shareholders want to prevent new shareholders from having the ability to destroy the company then that's easily accomplished. Just establish separate share classes with different voting rights. Many companies already do this.
- losing money year after year and amassing further debt and liabilities
- buying your own stock at market highs
they are just reckless.
At that point why don't just buy another's company stock instead of your insanely overvalued one. It's nonsense.
There's a reason why Buffett buys back Berkshire, but only if he finds the stock being undervalued. Otherwise it's not the best use of Berkshire money, it's just stupidity.
Please understand that buybacks are just one way to use money a company has and they are not always the best usage of money and they aren't even the best way to return money to shareholders (e.g. buying your own stock at market highs is a terrific way to burn equity as Meta has learned few years ago). It really can be nothing more than money burning.
There is no reliable way to determine whether a stock is overvalued or undervalued, so those are meaningless terms which apply only in hindsight. You are essentially claiming that Boards should be able to time the market, which is absurd and not actionable.
As for R&D and QA budgets, what is the correct amount? There is no reliable evidence that Boeing's recent troubles are caused by any particular spending amount on those line items. From the outside the problems seem to stem from culture and lack of discipline than from spending levels. But the reality is that all of us here are just guessing and don't know what's really going on.
And don't presume to condescendingly tell me what to understand. I understand stock buybacks perfectly well. In many cases they are the most tax efficient way to return capital to investors.
