u.today
- “How is this winning?”
- Let them fail
Virgin Galactic Chairman Chamath Palihapitiya makes a compelling argument against letting companies off the hook by bringing up IBM’s history of stock buybacks.
The Bitcoin-friendly billionaire brazenly calls all those who want to defend corporations that purchase their own shares “morons.”
“How is this winning?”
U.S. corporations have spent an infinite amount of cash to buy their own stocks to reduce their supply in the open market. According to basic economic theory, this helps them to artificially pump share prices.
Palihapitiya explains that IBM bought $140 bln of its own stock in two decades. Despite this massive effort, the tech giant has a market cap of $105 bln, and it recently reported its worst revenue since 1998.
Back in 2018, IBM acquired software distributor Red Hat after diving into blockchain technology with its Hyperledger project. However, the company has so far failed to revive its former glory due to a lack of innovations and leadership issues.
Let them fail
Multiple companies that squandered their balance sheets on share buybacks are now crying wolf, asking for government buybacks. This, of course, also applies to airlines, which have been absolutely clobbered during the COVID-19 crisis.
As reported by U.Today, Palihapitiya claimed that governments were supposed to let billionaires fail in a viral CNBC interview.
"Just to be clear, who are we talking about? We're talking about a hedge fund that serves a bunch of billionaire family offices?" he said. "Who cares? Let them get wiped out. Who cares? They don't get to summer in the Hamptons? Who cares?"