> Once you correct your understanding of this, you will see that GP is explaining things correctly.
If a companies liquid assets are more than a small fraction of the companies value, then management is doing something seriously wrong. Some valuation formulas punish companies who have excessive cash on hand.
Going to quote my original reply because I'm tired of repeating this point.
> Share buybacks are absolutely a good deal for shareholders when a company is undervalued.
If a company is undervalued, then the share price is less than the future earnings of the company. The value of their future earnings might be $1.01. If they buy back shares, they are paying $1 for $1.01 worth of future earnings which are realized by existing shareholders.
A classic example of this is Apple buying back shares over the past 5-10 years or so (less clear now with share prices being so high).
If a company is valued higher than the companies future earnings or the company needs to take on debt to buyback shares then it doesn't make any sense.
> There is no change in the value of the company. There are fewer shares outstanding though which means each existing share is worth more.
The company's value decreases by the buyback amount. Share price (ignoring positive signalling impact) remains unchanged.
E.g. Company has $100 market cap with 10 outstanding shares at $10/share. Company does $10 buyback. Afterwards, company has $90 market cap with 9 outstanding shares at $10/share.
Company shares are valued based on future earnings. If the company is undervalued, the value of remaining shares increases over time. As the future value of the shares taken off market is greater than the current share value. Lots of companies have gone this route; market cap increases over time and existing shares increase in value.
If the company is overvalued, the shareholders just get screwed as the company is buying back shares which are already worth less than the future value of the companies earnings.
> How Corporations Scam Their Shareholders and Screw over Workers
I don't see how workers are getting screwed. The main charge in the article is that executives take advantage of positive signalling around share buybacks to boost share price prior to selling shares. If this claim is true, the share price should go back down once more material public information is released that suggests a lower valuation. The losers in this scenario are shareholders who purchased in the short period following the buyback. Although some workers may fall into this group, the vast majority do not.
Also, the article implies that companies should go back to issuing dividends over share buybacks. This doesn't make sense. The tax advantage nature of share buybacks far outweighs the ill-gotten gains executives reap from this strategy.
On average, share price increases ~2% following a buyback announcement. So, while execs can 'scam their shareholders' with this scheme, the loss to shareholders is nowhere near the ~10-20% benefit shareholders get by realizing gains as capital gains instead of income.
> "Pressure to maintain corporate payouts may also be responsible for larger-than-necessary layoffs during the COVID-19 crisis." (only common employees get laid off)
> "...reduce or postpone investment spending for new projects, research and development, advertising and maintenance" (less money to employees, more to executives)
> "Buybacks also tend to raise corporate indebtedness and leverage, which can increase bankruptcies..." (borne by common employees, not executives)
also, employees other than executives cannot execute this sort of pump'n'dump.
All of these arguments apply to dividends as well as share buybacks. And, therefore, do not support a shift back to dividends.
If you compare the dividend yield of the s&p500 from 1980 to today, it dropped by around 3%. Based on today’s market cap, that 3% equates to around $900b. In the last year, we’ve had around $700b in share buybacks for s&p 500 companies. These data suggest that the shift to buybacks did not negatively impact liquidity, r&d, or overall ability to maintain employment levels.
> "All of these arguments apply to dividends as well as share buybacks."
no, adverse incentives (like here, where buybacks preferentially benefit executives) create moral hazards, which economic research has shown time and again. there's even a specific name for this particular issue: the principal-agent problem[0].
in the idealized case, you don't return money to investors if you have positive npv projects on the table (meaning more capital and less risk directed toward common employees as a side effect), but you will if you can enrich yourself regardless of those projects. dividends don't create these perverse incentives but buybacks in the current environment do.
The argument you’re now outlining is not a subset of the arguments you previously listed (and I was referencing).
I agree buybacks create adverse incentives. As I’ve stated elsewhere in this thread, the damages of these adverse incentives are outweighed by the tax advantages buybacks have over dividends.
Many companies buy back shares when it doesn't really make sense. For example companies with heavy debt loads buying back shares using leverage. The airlines were pretty bad about this.
Management often has poor/ short term motivations based on short term share price which can be devastating to companies.
First of all, as president he shouldn't have any private business interests. Second, under all standard policies, he wouldn't get the most basic security clearance with this fact pattern. Third, saying some other institution or GOP constituent could backstop is PART OF THE PROBLEM, then he is beholden to them, how is that a solution. Fourth, he deliberately withheld this information as part of a years long cover up, contrary to all prior norms, and we now know why, that alone should disqualify him from office. How much tribal blindness are we willing to accept in politics at this point?
You bring up many good points, none of which I strongly disagree with.
My only point was that it's not "easy and obvious" to "buy his debt and use it as leverage to extract political gain". There are many "outs" he can take if such an event occurred.
I started my career as a lawyer in 2008. I specialized on corporate bankruptcies and worked on many of the high profile cases we all read about. I can tell you I saw this first hand. I saw a hedge fund by a loan from a small community bank for $150k and use it to gum up the works and extract $50M. I guarantee Trump is at high risk of danger here. The legal system can absolutely be weaponized and with over $1B of debt there’s no way to know who owns every dollar. The thing is what if money isn’t what they demand? You’re assuming that they will accept payment of their debt. But with leverage comes opportunities for other demands. It’s actually terrifying to think of all of the things one could demand from a president or government under these circumstances. Absolutely insane.
The person I responded to was saying they didn't care about the future of the species.
I was replying that we, as a society, DO care about the future of the species. We put laws in place to help further it's survival, mostly around supporting the currently existing children (tax breaks, education, etc), but also around helping people have more children (FMLA).
The reason those laws exist really isn't that different from the laws that support property rights; they support things we, as a society, value.
Yes, but I don't see how that applies to the subject matter at hand. There is no law that says an employer has to provide extra financial support to parents in extenuating circumstances like this.
> As a society, we decide what things are important to us and everyone gets to help support those, like it or not.
If GP doesn't care about supporting parents or future generations (and he is in a position to make this decision), it's certainly his prerogative to not do so.
I think it's important to note that nowhere in the article (nor anywhere else I can find) does it state that the professor was "suspended". Rather, it only says that the professor will "no longer be teaching this class for the remainder of the semester".
I think this is an important distinction because it leaves the door open to the possibility that: 1) the professor voluntarily stepped down 2) the professor will return after the semester is over 3) the professor is being paid during this leave and will suffer no real professional consequences.
In other words, there's a real possibility that the Dean had the following conversation with the professor: "Hey, I know this wasn't intentional on your part, but this is quickly becoming a PR nightmare and I'd like to nip it in the bud. Would you mind stepping down from your post for just this semester until this dies down and I can get a handle on it? This will make everyone's life easier & you'll still get paid anyways."
In this light, there's less reason to be outraged at the Dean.
I think it's important to note that nowhere in the article (nor anywhere else I can find) does it state that the professor was "suspended".
The action was asymptotically close to a suspension (so in attempting to draw a distinction, you're basically splitting hairs).
In other words, there's a real possibility that the Dean had the following conversation with the professor:
More likely that conversation went like this:
"Hey, I know this wasn't intentional on your part, but this is quickly becoming a PR nightmare and I'd like to nip it in the bud. If we were to go by common sense and the basic ethical and intellectual principles this institution claims to uphold, we'd simply explain to the student that (being young and naive as they are) they're clearly jumping the gun and not seeing the forest for the trees -- and are doing themselves way, way, way more harm in delusionally believing themselves to have been 'microaggressed' by what happened, than by even the worst case version of what they fantasize as having happened. But that would require a modicum of ethical integrity and backbone on my own part, which, being the stuffed shirt that I am, you know I don't come even close to possessing. So to make my life simpler, would you mind taking the hit, stepping down from your post and basically allowing everyone to believe you were an insensitive ass (if not in fact an outright racist) for a while? BTW you'll still get paid - and this being USC, that's all anyone really expects you to care about anyways."
Even if that was the case, have you actually read the letter? It alone is so ridiculous that it's worth condemning.
Hell, I think this bit does it alone:
"It is simply unacceptable for faculty to use words in class that can marginalize, hurt and harm the psychological safety of our students"
Like, what? Are they going to outright ban all foreign words that could potentially be misunderstood as offensive? Will Kant need a rebranding to be allowed in class again?
It's unbelievable ethnocentrism and the fact that they actually have the gall to claim that they're doing it as a part of addressing systemic racism has to be the cherry on top. This is literally the same line of thought that leads to asking others to anglicize their name because it is offensive.
I agree with you. My claim is that there's "less reason to be outraged at the Dean".
If the professor was executed for this, for most people, there's reason to go to war.
If the professor was fired, for most people, there's reason to be outraged.
If the professor was voluntarily placed on leave with pay, well, maybe you still find reason to be outraged, but less so than the aforementioned scenarios.
In any case, most people in this thread are assuming the professor was fired, and that's incorrect.
PR nightmare is a bit extreme. A few students emailed the dean is all. I feel as though in these situations, you have a moral obligation not to back down if you did nothing wrong. Otherwise the bounds of what one is allowed to say gradually erodes away. Sort of like the “first they came for...” poem
We don't disagree on your point. I'm just pointing out that the degree of punishment enacted on the professor could be much less severe than most people are imagining.
> The Episerver acquisition is indeed a bad exit, and I think I will lose >$100k in stock I exercised
Based on what information? So far, all that's been publicly confirmed is that the sale price was below $600M, which presumably leaves opportunity for your shares to be worth something.
GP probably got information about the share price offered from current employees and did the math. Once the acquisition is finalized, they'll receive more details since they are a shareholder.
Employees don't know share or exit price yet. Won't be announced for a few more months.
However, if the OP is speaking the truth about the timeframe he got shares from, he is guaranteed to be up. There are definitely people who lost money on this deal, but definitely not Series A people.
It's one thing to have a strong opinion on morality -- it's another to support violence against other moralities.