It will dilute the bejesus out of already beaten-up stockholders. Share buyback karma.
By Wolf Richter for WOLF STREET.
Boeing, which has booked net losses every year from 2019 on, totaling nearly $32 billion, and which has borrowed huge amounts of money over those years, bringing its short and long-term debt to $58 billion while gutting its stockholder equity, now a negative $23.6 billion, has been in dire need of lots of cash to burn, after it wasted and incinerated $64 billion in cash on share buybacks to pump up its shares.
The company’s infamous pivot from aircraft engineering to financial engineering to please Wall Street has turned into a devastating mess, including for shareholders. Wall Street loved it at the time, and the shares soared by 500% between 2013 and the peak in early 2019. But since then, shares plunged and have given up most of the gain, and are back where they’d first been 11 years ago.
So today, after days of rumors about a share offering, Boeing announced a huge stock offering that will undo some of the devastation that the share buybacks wreaked upon its balance sheet, and it will dilute the bejesus out of current shareholders.
It will sell 90 million common shares (about $14 billion at the current share price) and $5 billion of mandatory convertible preferred stock that will qualify as equity for credit rating purposes. So that’s about $19 billion. It also granted underwriters the option for an additional 13.5 million shares ($2.1 billion at the current price). And according to a term sheet seen by Reuters, it can increase the mandatory convertibles by $750 million.
All combined, it would increase the total equity raised to $22 billion.
The mandatory convertible preferred stock is being marketed to investors with a dividend of 6.0% to 6.5%, and a premium of 17.5% to 22.5% to the stock’s closing price on Friday of $155.01, for when they convert into common shares at or before the maturity date of Oct. 15, 2027, according to Reuters.
This offering brings in sorely needed equity capital that the company had so recklessly incinerated with share buybacks before 2019. And it would largely fill in the huge hole that is its negative equity of $23.6 billion.
If Boeing actually raises the entire $22 billion, it would undo about half of the devastation of its balance sheet wreaked by the $43-billion wave of share buybacks in 2013-2019. That wave of share buybacks caused shares to spike by 500% into early 2019, pushing them from $75 to $450.
Now they’re at around $153 at the moment, where they’d first been in February 2015, down about 66% from the peak, just a hair from qualifying for a pedestal in our pantheon of Imploded Stocks (data via YCharts).
The dilution of existing shareholders from the share offering is going to be significant: There are 618 million shares outstanding, and adding the 90 million shares being offered today would dilute existing holders by about 15%. That’s before the conversion of the mandatory convertibles and the option of 13.5 million additional shares granted to underwriters. So if and when Boeing is actually profitable again, the earnings per share will be diluted by at least 15%.
Boeing stopped the share buybacks in 2019 as its difficulties mounted after two of its misbegotten 737 Max 8 aircraft crashed. Instead of wasting and incinerating $43 billion on share buybacks in 2013 through 2019 and $20 billion in the decade before the Financial Crisis, for a total of $64 billion, the company should have developed a brand-new plane to replace the 737. It should have fired the financial engineers and hired some aircraft engineers (data via YCharts).
Boeing’s corporate credit rating is currently one notch above junk at Moody’s (Baa3), S&P (BBB-), and Fitch (BBB-). There were fears that the cash-flow problems, production and quality issues, the huge amount of debt, and the ongoing strike by 33,000 workers that shut down much of the production in September, would trigger a downgrade to junk (our cheat sheet for corporate credit ratings by ratings agency).
A junk credit rating would make it even more difficult and costly for Boeing to raise the funds it needs to cover its massive cash bleed and to pay off the $12 billion in debt that is coming due in 2025 and 2026.
With the equity raise as outlined today, the company will have some limited financial breathing room, and will likely avert a near-term down grade to junk, so one day at a time. But it won’t resolve the production and quality issues around its aircraft, its labor woes, and the decades of damage that financial engineers from the top down had done to the company.
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Financial engineering is the why of our capital markets now. Will end poorly.
The old Air Sojourners saying used to be…
“If it ain’t Boeing, I ain’t going”…
The new saying?
“If it’s Boeing, I ain’t going!!!”
YMMV…
at least the executives are getting PENSIONS
and golden parachutes to boot
As Keynes observed, “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”
What happens when watering down the stock doesn’t work ?
“What happens when watering down the stock doesn’t work ?”
Why, bailouts of course! It’s the Duhmerikan way to reward the pathetically inept.
“Why, bailouts of course”
Especially for something like Boeing…one of a tiny, tiny handful of major defense contractors left – and sole provider for more than a few kinds of platforms.
Boeing is too-plugged-into-DC-to-fail.
Maybe the stable genius will apply his immense business acumen (as seen and proven on TV) and have all Boeings problems resolved in a few days?
He is really good at making deals…..even taught the art of it.
That failing, yes Cas, the bailout will proceed just as you point out.
Renegotiation of contracts with replacement of corporate and program management with Contractually Required Essential Personnel to be specified by the customer in the contracts.
Perhaps someday the US government will throw a bailout or rescue package under the pretense of national security and then cycle of privatizing profit and commonizing costs would be complete.
“It will dilute the bejesus out of already beaten-up stockholders. Share buyback karma.”
—
Numerous and ongoing Boeing 7XX airplane serious problems.
NASA Freezes Starliner Missions After Boeing Leaves Astronauts Stranded
NASA is once again turning to its more trusted commercial partner SpaceX for crew flights in 2025.
By Passant Rabie Published October 17, 2024 | Comments (41)
Boeing-built communications satellite breaks up in orbit. ‘Total loss,’ operator says
News
By Elizabeth Howell
published October 23, 2024
Boeing is no longer an aerospace engineering company; it’s now just a way to extract as much compensation for corporate insiders and shareholders.
Boeing is the poster child for “the financialization of everything.” Focus is now on financials above world-class engineering, quality, and safety. Prove me wrong. Finance is a service only.
Make stock buybacks illegal again.
Set CEO and C-suite salaries at some reasonable limit based on a reasonable average employee salary ratio. Something like “a million dollars.”
What a complete disaster and embarrassment.
Boeing, like many financialized corporations has lost its way. Boeing = Woeing.
Shares buybacks are done by lots of companies and is a way to pay back the shareholder (investor), just as they would do with any investor. Let companies decide.
Up until 1982 share buybacks were illegal as they were viewed as a form of stock manipulation. This changed by the simple expediency of the SEC changing their regulatory view. Nobody voted on it. How convenient for any notion of accountability. Maybe some of the old wisdom was best after all ?
Tender offers for shares were legal. That was used to good effect by companies that knew their stock was undervalued. Now it’s something that companies do at whatever stupid price is prevailing.
Just a small part of the Reagan-Puppet damage, Dan.
Boeing is the last company that should be buying back stock. That cash should be used in the business to make their products more efficient and reliable.
How does it pay the investor? Unless your shares get bought, you could lose money if the stock price goes down, as it has for Boeing.
Share price is market cap(italizatiin) divided by number of shares. Fewer shares means a higher price for the rest.
There is nothing inherently wrong with share buy-backs just like there is nothing inherently wrong with dividends — they both return company money to its owners.
The problem is when the company returns money it needs for future growth.
And it’s a sin when companies borrow money only to give it away.
Some companies (BRK, GOOGL, etc.) do it properly. Others don’t.
stock buybacks increase demand for shares. this has a positive impact on pricing during the period of a buyback. investors can choose to sell at prevailing prices or not.
Central B- “…a positive impact on pricing during the period of a buyback…” still whiffs of market manipulation to me…
may we all find a better day.
“In the beginning, the universe was created. This has made a lot of people angry, and been widely regarded as a bad move”
– Douglas Adams
I don’t think market manipulation reflects well on the entire project.
Both the Chinese and the Russians have developed alternatives to the 737. The Comac comes to mind. Significant competition is coming. At our current rate Boeing might be out of air travel in ten years or the Chinese will buy the name and logo and paste it on….and even that might not work. Who wants to fly in a Boeing? My wife does a lot of business travel. “She ain’t going if it’s a Boeing.” She checks every flight.
Every time there is a story about Boeing or Airbus, there’s always at least one armchair expert on aviation trotting out the COMAC or Russian competitor that will sink the Big Two. Anyone even remotely informed about aviation in general (and especially of certification) knows these ‘competitors’ coming to eat Boeing’s lunch are optimistically a decade + away from threatening their businesses in the parts of the world with legitimate aircraft regulation (eg FAA, EASA, CAA, JAA, etc) won’t certify these planes for use in their jurisdictions. You could build the world’s safest aircraft in your backyard and it wouldn’t matter because that’s not how regulations work with respect to civil aviation.
COMAC needs a decade+ of *trustworthy* data before the FAA/EASA will even look at certifying their airplanes.
Boeing is rightfully being raked over the coals for their piss poor management, no disagreement there. But just take a quick look at how many shoddy aircraft manufactured/operated abroad to see just how much worse it could be. Personally I look forward to more space on my Boeing-aircraft flights as a result of hysteria and ignorance
You guys want to fly Russian?
That’s funnee!
Russia is out of compliance with numerous international standards and is rated with Liberia as one of the most dangerous places to fly.
# DonPaisa
Part of the Boing spectacular is that Boing planes are FAA certified. Others may have difficulties to be certified by the FAA, but Boing may face large hurdles too. There is the reciprocity of jurisdictions, the FAA can not risk that their certification is no longer recognized overseas. The CAAC grounded the Boing 737 Max for a considerable longer time than the FAA.
You may like to have more space on a Boing aircraft, the airliners for sure will not. It cut straight into their bottom line.
Boeing with an e
Bong Aircraft?
They must have been on something to think they could merely software their way out of a totally shit unstable at takeoff (and likely other flight regimes) airframe, just to get the gas saving engines on it that Airbus SAFELY put into use.
The military can do that, but they don’t have to show a profit, and an ejection seat crash is just part of the job.
Dividend distributions reward shareholders.
Share buybacks amount to approximately $800 billion per year for the S&P 500 companies. That’s a lot of capital going up the chimney chute or supporting golden parachutes instead of going towards productive ends. The incentive structure is out-of-whack.
The incentive is the CEO and other members of the C-Suite are compensated based on increases in the share price. Stock buy backs are the easiest way for a CEO to increase his compensation without having to do anything productive for the organization.
Kent,
Don’t disagree.
But where the hell have the institutional investors (especially pension funds/endowments) been while all the trillions in buybacks have been going on (for decades)?
If anybody is likely to be a long-term holder of shares, it is the institutional investors, who have the longest investment horizons.
And it ain’t like the CALPERS and Ivy Endowments of the world have been shy about blathering on about plenty of marginally- financial-related corporate activities.
So why their pretty complete silence about buybacks – which *directly* affects the long term economic health of their funds?
if done without taking a loan to buyback the shares I’d agree. Getting into debt is not helping the investor, it helps the CEO and the C-Suite (temporarily).
RE: bblontrok:
You state that share buybacks are “a way to pay back the shareholder (investor)”. While that is technically true it is, unfortunately, designed only to benefit the C-suite. It assumes that the company doin
Before this scan was legalized there was a much better way of “pay back” for an investor. They were called dividends. Dividends have the advantage of allowing the recipient the chance to invest in ANY company they may deem to be the best for their particular circumstances.
The basic problem with share buybacks is that the company doing the buybacks has to assume that their company is absolutely the best investment on the planet and no other investment needs to be considered.
Good for the Execs, bad for everybody else.
Ton of companies do it as a tool for signing/retaining the best or better talent, connections, etc.
This goes beyond Boeing – ZIRP/NIRP anyone?! No connection between that and worsening concentration of wealth in the top 5%! /s
AuHound,
Get what you are saying in general…but why can’t the shareholders of buyback-ing companies simply *sell* their transiently propped up shares and diversify themselves (*especially* if shareholders think that such buybacks are an artificial, doomed prop)?
There are these things called dividends for that purpose.
Bullshit. Stock buybacks are a form of looting. In Boeing’s case, the need to replace the 1960’s era 737 was glaringly obvious by 2010. Instead, the financial wizards at the helm opted for massive share buybacks and dividend bonuses (all while shafting the workforce by eliminating defined-benefit pensions and almost freezing wages for a decade.) The buybacks were funded by borrowing, saddling the company with debt while big shareholders ran off with the loot. This is akin to a Mafia “bust out” takeover of a small business, running it into the ground. Stock buybacks were illegal for decades, for good reason: they are a form of fraud. Boeing is now a shell of its former self, with every one of its programs in shambles.
When Boeing’s HQ was moved from Seattle to Chicago in 2001, a plan was in place to ruin the company. In 2022, what was left of the carcus was moved to Virginia near the pentagon to be finished off. Corporate vultures win the day!
Wait until the PE vultures get their hands on it to milk it further! /s
“Boeing is the poster child for “the financialization of everything.” Focus is now on financials above world-class engineering, quality, and safety. Prove me wrong. Finance is a service only.”
You don’t need an outside entity like private equity to loot a company. If the executives are all on the same page, they too can load a company up with debt and pay themselves. The “how they pay themselves” is slightly different between PE/LBO and with existing leadership. With existing executives, it’s by executing share buybacks. My understanding of how private equity gets paid is paying themselves out of the debt used to purchase the company directly (“getting your bait back”), which is transferred onto the company. I’d like to find a play-by-play analysis of a modern leveraged buyout (what private equity used to be called – recall KKR).
The common theme is loading up a company with debt. This is one side effect of keeping interest rates excessively low.
Share buybacks should probably be illegal as it creates perverse incentives. If share prices were solely based on fundamental performance, as used to be the common idea, it might make sense. But now with de facto government support of the stock markets, and a better public understanding of stock pricing, it’s heavily “Greater Fool” driven pricing.
I agree that share buybacks should be illegal, and I say this as a rock hard conservative. The “purists” all argue that they are like dividends, etc., so why not make them illegal and just make companies do dividends if there is no difference? (and don’t get started on cap gains versus dividends as that can also be fixed)
The fact of the matter is that stock buybacks became huge once executive compensation was tied to stock options. They are done for the benefit of executives, not stockholders, and if a company can’t find better ways to invest its money, the solution is to get new management, not for the company to buy its own stock.
Would you invest in a company whose business plan was to just go back into the market and buy its shares, nothing else? Heck with people buying into the ponzi bitcoin schemes, it might just work!
There are other sides to this:
– IBM dividends have been very nice over the same period of time
– someone who purchased IBM shares in the last year has done quite well
Not quibbling with Wolf’s big picture look at the balance sheet. Nor do I doubt the logic of big tech P/Es coming back to Earth sooner rather than later. But my outlook is conditioned not by domestic national debt mismanagement, BRICS+ separation and escalating warfare globally.
Argghhhh!
But my outlook is conditioned by……
Careful with the serious problems aspect to all of this.
Boeing has to play the mea culpa role in a lot of this due to very large gov’t contracts. The reality is that many components to Boeing a/c are subtracted out. As is QA and performance for routine and emergent maintenance.
in short, a bigger problem than just Boeing.
What a day!
….sub-contracted out.
This stock should be trading below $100.
What a disaster.
A national treasure lost and the perpetrators walk away with their pockets full.
The problem is figuring out who the perpetrators are.
Let us also spare a moment to reflect upon the actual empirical “genius” of ZIRP – 20 decades of gutted interest rates (via money printing and the old Fed-Treasury pocket pool) that could have been used to invest billions/tens of billions into any highly concentrated/capital intensive industry you care to mention…but instead of real asset creation…yielded little more than existing asset inflation.
I would hate it if I owned a pool of non-junk rated bonds, and it included a chunk of Boeing debt… While not officially downgraded, might as well be. The future is bleak at the moment.
Why? Junk bonds are still less risky than equity.
Symbolic of the propensity of corporations (over the entire planet) especially since 2008 to substitute for true investment financialization.
– There are people who think that Boeing is counting on a government bail out because the company earns still A LOT OF money from the US Department of Defense.
That offering showed that it doesn’t need a government bailout. It got an investor bailout. But it needs to get its sh*t together, pronto.
True statement.
How well spoken.
Almost a synthetic strategic bankruptcy, to restructure itself and pretend they have a viable corporation. Excellent financial engineering that was probably hallucinated by an AI bot enchanted by a peyote trance.
If they would shut down all production and just buy nividia they might become solvent.
Top notch writing: “…infamous pivot from aircraft engineering to financial engineering…” Love it! Just sent in my annual donation. Keep up the great work!
Given the insanity of this market will never wane…why do I see this as another buy the dip moment down the road….any dips will just be gobble up, plus this one will benefit from the too big/important to fail category.
This mess scares the heck out of me every time I step onto a plane. Makes me doubt the quality of work in a company that’s in a fincial tailspin, with workers worrying about their jobs and executives worried about share prices.
I have to fly on their crap 3-4 times a month, I mean at this point they’re basically part of “infrastructure” because some of our jobs don’t exist without commercial flights, and as far as “choosing” another plane I don’t know what people are even talking about, at least for me I can’t go to where I need to without getting on a Boeing. So stories like these are no Bueno for my peace of mind.
“The company’s infamous pivot from aircraft engineering to financial engineering to please Wall Street has turned into a devastating mess.”
Isn’t that always the result of just about every company that pivots to finance?
I have noticed for a lot of companies that make/made things (like Boeing, Intel, HP, Xerox, GM, GE, probably many others), if you look at the histories of these companies, at some point someone says something to the effect of: This used to be a great engineering firm until the finance guys took over.
all of this will continue until there is a collective understanding in america that wall street is not good for america, and that it is a parasite rent-seeking construct.
once that is understood, change can hopefully begin.
Who will facilitate such a collective understanding when the media is run by Wall Street too?
Reality has a way of asserting itself.
Important comment!
Buybacks : that’s how Boeing pay workers. Mech strike bc BA shares
are down. BA produce the 737, 787, F-15, KC-41 tankers, apaches, bunker busters bombs…E Oct 24 : Vol is up.
MCD was $320 last week with negative equity. BA is more important to
our national security the junk food king. F-15 F-150 truck.
Golden rule for intervention in any market is to make money – or buy low sell high. That way, whether it is for the oil reserve or agricultural products, the authority is reducing price volatility.
Boeing has spent $40 odd billion at prices between $250 and $350 a share and is selling them all back again at $150.
Worst inside trading I have ever seen.
(I bet the directors did a lot better with their options).
Mickey Droy
“Boeing has spent $40 odd billion at prices between $250 and $350 a share and is selling them all back again at $150. Worst inside trading I have ever seen. (I bet the directors did a lot better with their options).”
We’ll stated!
After I read your comment, I checked SEC Filings for Boeing stock purchases by Boeing’s NEO’s (named executive officiers). Since 2003, I found only 1 purchase of Boeing’s stock by a NEO. In 2022 CEO Calhoun purchased 25,000 shares for 3.97 million.
So, the guys who were running Boeing for the past 20 years thought soo much of Boeing as a business that they wouldn’t invest any of THEIR money in it, but they’d gladly invest the shareholder’s money in it via stupid over-priced share repurchases. So much for manager’s having “skin in the game”.
And by the way, of course there were tons of stock sales by NEO’s, which I assume were mostly shares granted to them by the company.
Forget the barbarians at the gate, these were barbarians in the gate.
Remember the article by Wolf about the Microsoft guy!
In other words, the management has eaten the seed corn and is now starting to eat the company. The machinists should have taken the deal. Fucking stupid doesn’t even begin to cover both sides of this equation.
If Boeing had had followed the advice of numerous aviation experts (and common sense) and spent just a part of that ridiculous sum wasted on buybacks on a program to finally replace the 737 (whose design dates back to the 1960s) with a clean-sheet single-aisle airliner it would be in a completely different place now. Instead, it bought more of its own shares during those critical years than it made in profits. It’s insane.
It is much less about the cost of a clean sheet design than delay due to FAA certification. Airbus would have a massive lead with its NEO planes since it just needs to put on new engines.
They couldn’t help themselves. The 737 is the most successful commercial airliner in history, and they figured that improvements would make it more betterer, or something. It was a short-sighted decision.
The 737 Max is a modern and fuel efficient jet. They just cut many corners in the software and then the production QC processes. The plane’s software flaw is fixed and it will be in production for years and service for decades. They need to get the production rate back up but in general the 737 is the least of their problems now. The 777x and their military and space programs are disasters.
… It’s also Franken-jet, regardless of efficiency. The reason they need the overbearing, controlling, automated software in the first place is because they slapped on engines that are too big and powerful for the existing airframe, altering the lift characteristics of the airplane.
A clean-sheet design, purposely built for modern engines, along with planned design upgrades for even more powerful engines in the future would have set Boeing on the right path for 30-50 years.
Now their short-sightedness comes back to haunt them even more, because the 737 is TAPPED-OUT. They will eventually need a clean-sheet design anyway, but in the meantime, they’ve blown billions, have to manage through the terrible PR fallout (multiple levels), and will need to build and maintain Franken-jet, with all of its complicated BS, for 30 years — while also making sure it doesn’t kill anyone else.
One or two more crashes of the MAX and it’s game-over for Boeing. Outside of third-world countries, there is not an informed consumer getting on those airplanes.
I’m a Delta flyer, and if Ed follows through on his commitment to buy 100 MAX-10s, I will free-agent to whatever route gets me to my destination NOT on a MAX.
Iterating on a successful design isn’t a bad thing. Airbus did the same thing with the NEO – and older airframe with much larger engines. Just because it’s not a clean sheet doesn’t make it a bad plane, it is a safe plane (the software issues are fixed) and it meets the needs of airlines (is actually more efficient than the NEO in many cases). Basically nothing in it is the same as the 737 Jurassic except the nose cone and airframe circumference. The wings were all new for the 737 NG and is a newer wing than the A320 series, the avionics are updated and modernized, interior of course is modern and Boeing was the leader in pivot style overhead bins. Boeing could do a clean sheet plane and probably end up with something similar to what ended up being called the A220. A nice plane but not exactly an earth shattering success or paradigm shift for the industry. 737 Max will be produced well into the 2030s so you will have trouble avoiding it forever.
…mebbe, upon boarding, just give Max passengers a share of BA stock and a campaign button that proclaims: “I’m a Proud Boeing Beta-Tester”…
may we all find a better day.
@crazytown:
Except the A320neo was DESIGNED to be fly-by-wire, and already was purpose-built to have such maneuvering characters controlled via computer and software systems — including 3, 4, or even 5 sensor redundancies, compared to Boeing’s original 1 (!) with MCAS.
Airbus was in a position to reconfigure the 320 from a holistic engineering starting point, NOT adding extra, adjacent fly-by-wire systems to existing hydraulically-actuated ones like Boeing has done.
It’s a Franken-jet.
…to be fair, I shoulda added ‘and aircrew’ to ‘passengers’…
may we all find a better day.
@SingleMaltScotch Not just that, but the A320 was designed from the get-go for high-bypass turbofans (i.e., large engines) and as such fitting larger engines on it is a relatively easy task compared to the 737 whose basic design was meant to accommodate way smaller low-bypass engines.
The first rule of corporate management is that money invested in R&D and innovation’s, cannot be stolen and used for multi million dollar stock options for the corporate officers…. How do you expect these guys to pay for their mansions, jets, and yachts if they spend all that money on making decent products?
Would much rather see tax payer owned companies. 70% of the original tech in the iPhone came from public sector and they package it to up for the final mile and they and their investors see all the benefit. These types of companies will likely be massive bailouts at some point, not unlike the bailout of auto companies and things like the CHIPS act. Poor decisions by companies and government will still just continue to benefit the few at everyone else’s expense.
First sentence calls for taxpayer (ie government) owned companies. Last sentence lumps government into the “benefits the few over the many” category. Which is it?
Or is it just “we need to give communism another chance – but do it RIGHT this time”?
Our government, with tax payer money, provides lot of loans, grants and other benefits. If it all goes wrong the tax payers lose. If it significantly benefits the tax payers get loans paid back but little benefit beyond that.
Not even clear where the communist comment part of that came from but there are no communist countries but communist parties at the socialist stage of development, and last time I looked China is doing just fine. They have privately owned firms as you can have different economic models. The difference is the government is not beholden to them. Is it a utopia, of course not, there is no such thing. Has it industrialized and been very successful over the last 50 years? Absolutely. Does it also have a lot of challenges similar to the US and other developed countries? Absolutely.
Just as capitalism is better than fuedalism that came before it, there is a model beyond capitalism that is better for the people of the country and the world. Hopefully, while we may disagree on the ultimate answer, we can agree we can do better.
Glen – extending, in very-rough analogy, the late Mort Sahl’s observation that: “…the United States is the worst country in the world…AFTER the rest of them…”.
Indeed, we can, and must, as a species, ALWAYS try to ‘do better’, or join those earlier civilizations that lost their plot societally, and/or in maintaining a life-supporting environment…
may we all find a better day.
Boeing will not be the only one diluting their stock. This will become common, as sales and profits shrink, and the need for cash increases. The average stock investor will never know what is going on until it is too late.
It is always the same. The average small investor always stares into the headlights of truck about to run them down, unaware of what is happening.
I’m curious to see if Wolf and others think Apple is in the process of buying back their stock in lieu of investing for the future. Similar to Intel and Boeing.
Apple is in far better shape than Boeing and today cannot be really compared to Boeing. But it has taken on a huge amount of debt to fund part of the share buybacks. It used to have a pristine balance sheet with little debt. Now it has over $100 billion in debt. And revenues have stagnated since 2022 despite big price increases.
Crazy how fast tech sector can change. I was at Intel during all of the 90s and it was great until they totalled botched seeing the next tech wave. Even the executives couldn’t believe when Compaq came out with sub $1,000 PC at around $800 and they knew they needed to get in front but they couldn’t see it. Instead they dashed off into ventures such as software and massive data centers and such. They haven’t seen any CHIPS act money yet but unclear it will be successful.
Intel is actually, in the next few years going to be selling some AI chips.
Interesting…
I wouldn’t count them out. Their name recognition alone.
sufferin’ – ah, ‘name recognition’. A major ingredient of the financialization process of raiding/raping/prostituting into oblivion of formerly-productive firms…
may we all find a better day.
Maybe SpaceX should buy Boeing. Seems like a natural fit. Elon would likely skip the nextgen 7xx and go right to the starship Enterprise.
Elon knows how to pick the winners!
Errrr…. I mean…
Too soon?
😆
I’m surprised no one is seeing similarities with auto workers union that wanted a return to better pension benefits.
Apparently Boeing workers lost their pensions years ago too, and that seems to be at the heart of this ridiculous share offering.
It seems the dilution is a double edge sword, that fires a warning shot on one hand — doing extreme restructuring and hinting at bankruptcy — but it also offers to buy time for things to play out. However, if this is about ultimate solvency, the workers are going to have a challenge, bleeding money out of a company that can’t afford its workforce.
Diluting shareholders and have a greedy workforce doesn’t seem like a positive picture. Nonetheless, the auto workers got a raise and a lot of those stocks have bounced back big time — will Boeing get lucky too?
Most workers get Social Security when they retire, plus whatever defined contribution plan they followed during their careers, such as a 401ks or IRAs. Boeing workers have been on this program for 10 years. Why should they now get something different?
“Nonetheless, the auto workers got a raise and a lot of those stocks have bounced back big time — will Boeing get lucky too?”
Only GM has risen, but Ford has dropped and Stellantis has plunged. The financial consequences of the strike (much higher cost of labor) don’t immediately show up, but then they do show up in earnings, and eventually shares react (see Ford today, -6% afterhours).
Auto companies are really starting to slam into the ground, especially in Europe with VW (the largest manufacturer in Europe) shutting down three (3) manufacturing plants and imposing a 10% cut in wages for all existing workers whether the unions like it or not.
“Auto companies are really starting to slam into the ground, especially in Europe with VW…”
Tesla is not, and the Chinese EV makers that are selling in Europe are not either, LOL, unless the new protective EU tariffs kill their sales. They’ve been kicking butt, including Volkswagen’s butt.
But you’re right, Volkswagen is now in an epic battle with its unions, it needs to bring down its labor costs, and it’s gloves-off. They need to shut down some ICE vehicle production and increase EV production, but it’s not the same, the supply chains are different, the skills are different, and EV production requires a lot less labor, and the unions have gotten in the way. So Volkswagen is trying to push them out of the way. This is going to get very rough.
US EV sales continue to grow and gain market share, while ICE vehicle sales are declining. It’s kind of a sad truth: EV makers gain in this game; whereas the US legacy automakers are cannibalizing their ICE sales with their EV sales. But they’re too stupid to make money on EVs (unlike Tesla), and so they’re losing their rip-off-priced ICE truck sales and are gaining sales of EVs where they’re losing money. The US legacy automakers cannot be helped. They cannot manage themselves out of a paper bag. See Ford today, shares -8.5% after earnings. I’ve been saying this for a long time, and it’s playing out now in front of our eyes.
But the Korean automakers (they actually produce at US factories) are kicking butt in the US, including with their EVs. They’re now in the #4 slot behind GM, Toyota, and Ford. They blew by Stellantis and are closing in on Ford.
https://wolfstreet.com/2024/10/02/ugly-q3-for-ice-vehicles-total-sales-dropped-year-over-year-but-ev-sales-jumped-even-at-gm-ford/
https://wolfstreet.com/2024/10/02/teslas-global-deliveries-rise-best-q3-ever-but-not-enough-to-fix-the-shattered-high-growth-story/
https://wolfstreet.com/2024/09/20/tesla-model-y-now-a-hair-from-1-bestselling-model-closing-in-on-toyota-rav4-former-1-ford-f-150-is-3-stellantis-plunges-off-greed-cliff-ev-share-rises-to-9-0/
Greedy?
lol
They just want to know they can retire. How TF is that greedy?
The illusion of one being so very far above the workers underneath us is rampant in this country. When the reality is how very far above us All the rich are. It’s like well a Boeing plane at 30,000 feet and we’re all on the ground.
You have more in common with produce pickers from Mexico than you do the rich.
Re: They just want to know they can retire
They definitely aren’t a special class of humans — everyone is concerned about retirement — and they’ve had an amazing chance to be invested in something like the s&p.
It’s short sighted on their part — nobody likes inflation or a hesitant slowing economy — but put into perspective, they’re endangering their future livelihoods by killing their business.
I get a COLA raise next year of about 2% — I wanna know how I can live on that, while people at Boeing or wherever get massive increases in pay and benefits. The greed is in plain sight.
It should be clear to all by now that we need to End the Fed and add a balanced budget amendment to the Constitution. But that won’t happen until the debt bubbles collapse or the dollar crashes. The money printing and interest rate repression have distorted the economy in many ways. Socialism doesn’t work.
Capitalism doesn’t work. We need a Hybrid.
We don’t have laissez faire capitalism, we have regulated capitalism. Vote on Nov. 5th.
we don’t practice free market capitalism so maybe we should give that a try. instead, we already have a hybrid corporate-government economy, and centrally managed bond market. the combination of the two has lead to these types of problems, such as wealth disparity.
“…today, class, we examine the terms: ‘wealth disparity’ and ‘the poor will always be with us’. Compare, contrast, and discuss. Bonus discussion will be: ‘what is ‘proper investing’, and should it be taught (like citizenship) from the earliest grades as a necessary part of training our young to better-achieve future success in their careers?…”.
may we all find a better day.
We need capitalism with stable money. Stable money levels the playing field. Inflation picks winners and losers.
Locally, Boeing is known as the Lazy B Ranch. Actually, it is the Welfare Queen of the Universe. Half its biz is direct government MIC contracting. Even has its own government entity to finance sales…the Import-Export Bank. Boeing was bankrupt in 1970 and bailed out, as it will be in the near future either directly or indirectly. Talk to any employee at their plants in Everett or Renton…they mostly hate the place even though the work pays well enough. And this hate has only gotten worse since management installed an aggressive DEI hiring policy……the usual “target, not quotas” regimen to legal up, complete with mandatory diversity seminars for everyone, not just the recalcitrant. Weeding out bigots is a more important corporate priority than building planes whose wheels, doors, wing panels don’t fall off. The 737 Max Crasher was fairly typical of Boeing corporate thought…just strap some new larger heavier turbines to the wings of an ancient airframe and sort out the flight characteristics later with software. Hey, updates work for Microsoft. And mainly back to something important……goosing the stock price.
I’m surprised the system still has enough integrity to force Boeing to do a capital raise. Policy makers cave easily.
GM survived bankruptcy and came out stronger. Why should Boeing be different?
I certainly wouldn’t say GM came out stronger.
Boeing is running out of SM-3 $15M/pcs. Inventory is depleted. The waiting line for F-15 and apache is 7Y/10Y. Demand is high. The 737 competes with Europe ADS and China.
RTX and BA produces the SM-3. 1M RTX all time in Oct.
MW: Ford has too many cars on dealer lots, and that’s only one of its problems…
Ford’s real problem is that is has management that cannot manage its way out of a paper bag. See my comment in reply to your comment above.
Didn’t a former head of Boeing run Ford for a long while?
When I was working at the DoD Boeing was put on our blacklist for procurement because of the fraud they repeatedly engaged in. They were nothing short of corporate criminals who fleeced the government and taxpayers at every opportunity. I don’t give s$it about Boeing.
only semi on topic, but cnn ran an article today with two choice quotes, look below. did they only ask wall street insiders? what americans are upbeat about lower interest rates, and what would that have anything to do with purchasing things, other than houses, which has gone the opposite way in terms of mortgage rates?
why does the media continue to insist that the stock market is the economy? what is the end game?
“The Conference Board’s latest consumer survey showed that Americans this month became more optimistic about the future of both the labor market and the broader US economy. The monthly survey’s Consumer Confidence Index jumped in October by the fastest clip since March 2021.
Americans in the survey said they became more upbeat over recent stock market gains and lower interest rates, while signaling plans to purchase big-ticket items in the near future. In September, jitters over the job market’s health weighed on consumer confidence, but economic data after that showed that the job market remains solid. Americans took notice.”
MW: Boeing raises greater-than-expected $21 billion from new stock sales
MW: 10-year Treasury yield crosses ‘line in the sand’ that begins to spell trouble for stocks
… after which it lost steam and fell for the day.
Wolf,
The current capitalization structure (if one can call it that) will not survive even with another $20 B in equity since Boeing has $12 B in long term debt coming due over the next two years. Much worse though is the fact that it doesn’t much matter how many aircraft are ordered or delivered since the company is losing money on each copy. Where will the capital come from to design and build a brand new aircraft? They’ll likely need at least $30 to $40 B to develop this.
Consider that BA is estimated to generate revenues of $69.5 B in 2024 which is not far from where the company was back in 2011 when they pulled in $68.7 B. Adjusted for inflation, they’re far below where they were more than a decade ago.
Long-term debt of $68 B does not include the underfunded pension plans either so there’s more risk here than meets the eye.
Your creative phrase of “consensual hallucination” most certainly applies to those who choose to ‘invest’ in Boeing since they’re forking over $150 for a piece of paper that has a value of negative $38.
Watching Boeing implode is one of my guilty pleasures in life. I have a friend who works there so I know the consequences will hurt- but the shear greed and pompous buffoonery of decades of management created this mess.
Thank you McDonnell Douglas and Wall Street, you’ve allowed me to cancel my cable as I can sit down and read about your malfeasance rather than watch TV. The greatest show on earth!
BA has a permanent backstop in place from the US Govt. If the gov’t wouldn’t let GM fail, they won’t let the American half of a global duopoly fail.
The government DID let GM fail. If filed for bankruptcy, shareholders got totally wiped out, many bondholders took huge haircuts, many factories were shut down and sold, union employment got slashed, etc. In bankruptcy, GM got DIP financing from the government, and when it emerged from bankruptcy as a new much leaner corporation, the government bought some of the newly issued shares, which it later sold.
Is memory this short?
Share buybacks were illegal until 1982; and, prior to this share buybacks were considered a form of stock price manipulation, and therefore illegal. Our representatives in Congress had it right before changing their minds.
One of these days a recession will come along that will create a bar market. Think about this, what if the major indexes get cut in half? The current market cap for all US publicly traded stock is estimated at around $55T, implicating a decrease of something like $27T despite the hundreds of billions spent propping them up. People are going to feel a whole lot poorer should this happen. Perhaps investors will wake up and demand that they be made illegal again.