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Wed Mar 25, 2020, 02:12 PM

Corporations can issue stock to raise money instead of grifting the government.

Corporations issue stock to raise money.

Unless there is something that is preventing them from issuing stock (shareholder greed, CEO greed, etc.), a corporation should be issuing stock to raise money instead of taking handouts from the government.

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Response to Quemado (Original post)

Wed Mar 25, 2020, 02:14 PM

1. They could also borrow against their assets

Itís been done before

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Response to underpants (Reply #1)

Wed Mar 25, 2020, 02:34 PM

5. that's the primary solution (other than cutting costs)

that said, lenders are tightening up and asking for wider spreads.

most businesses don't understand the concept of a rainy day fund.

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Response to Quemado (Original post)

Wed Mar 25, 2020, 02:22 PM

2. They could just sell the stock they bought back, when times were flush.

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Response to 3Hotdogs (Reply #2)

Wed Mar 25, 2020, 02:57 PM

7. Exactly. Treasury stock can be sold.

Definition of Treasury Stock

Treasury stock is usually a corporation's previously issued shares of common stock that have been purchased from the stockholders, but the corporation has not retired the shares. The number of shares of treasury stock (or treasury shares) is the difference between the number of shares issued and the number of shares outstanding. Since the treasury shares result in fewer shares outstanding, there may be a slight increase in the corporation's earnings per share.

Treasury Stock is also the title of a general ledger account that will have a debit balance equal to the cost of the repurchased shares being held by the corporation. The corporation's cost of treasury stock reduces the corporation's cash and the total amount of stockholders' equity.

The shares of treasury stock will not receive dividends, will not have voting rights, and cannot result in an income statement gain or loss. The shares of treasury stock can be sold, retired, or could continue to be held as treasury stock.

Source: https://www.accountingcoach.com/blog/what-is-treasury-stock

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Response to Quemado (Original post)

Wed Mar 25, 2020, 02:27 PM

3. How does that work? Our company is having severe financial issues and needs money, so buy our stock because it's a great investment.  ( n/t )

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Response to Quemado (Original post)

Wed Mar 25, 2020, 02:32 PM

4. companies hate issuing stock when their stock price just crashed

they'd hate to raise money at $45 per share when the stock was just $70 per share a month ago. they figure they're getting a terrible price and putting more stock out there usually makes the share price go down even more.

if a company didn't really need the money, they'd have all kinds of reasons not to bother.

if a company really did need the money, then this would cause notable problems. first, it would invite additional investor/rating agency scrutiny, which could very well downgrade the company, which would make the stock fall even more.

that sort of thing could trigger even more problem, possibly breaching other lending covenants or causing investors to pull out, etc.

in some cases it could even lead to a bankruptcy or hostile takeover.



if a company really had a liquidity issue, it would look first to cutting costs (if only temporarily) and/or borrowing first.



i'll agree that most ceo's incentives don't encourage them to issue shares in such situations, but there are reasons that go beyond just that.


the real problem is that there aren't incentives to keep the large cash cushion that accumulates in good times. instead they have an incentive to buy back shares or issue special dividends or spend on acquisitions, leaving them lean and less able to cope with surprises.



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Response to unblock (Reply #4)

Wed Mar 25, 2020, 02:59 PM

8. I'm sorry, but, IMO, they should bite the bullet just like the rest of us.

Didn't Mitt Romney say that corporations are people, too?

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Response to Quemado (Original post)

Wed Mar 25, 2020, 02:39 PM

6. Whatever money they get from the gov't should be exchanged for current stock at current price.

Whatever money they get from the gov't should be exchanged for current stock at current price.

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Response to keithbvadu2 (Reply #6)

Wed Mar 25, 2020, 03:22 PM

9. I'm fine if the government buys stock

At a 52 week average price or something like that. Itís supposed to be emergency help after all, but the idea that they just get money after they were irresponsible and we get nothing doesnít sit well with me.

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Response to Quemado (Original post)

Wed Mar 25, 2020, 04:27 PM

10. Not all corps are public.

So they don't have stocks to sell.

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