Friday, April 19, 2019

Buffett Defends Buybacks

Even though stock buybacks have come under fire in Washington, famed investor Warren Buffett says they make "nothing but sense." In fact, Buffett announced that Berkshire Hathaway would repurchase some of its stock. Although a company can distribute money to shareholders through dividends as well, Berkshire is noted for having paid only one dividend in its history, in 1967. Berkshire recently changed its buyback policy. Previously, a buyback could only occur if the repurchase price did not exceed 1.2 times the book value. Now, the company can undertake a buyback if Buffett and his partner, Charlie Munger, believe the stock is selling below its intrinsic value.

Thursday, April 18, 2019

Investors Sue Lyft

Lyft's stock price has fallen 17 percent from its IPO price of $72. An now, investors are suing the company, claiming the IPO was over-hyped. Specific claims in the lawsuit are that the company exaggerated its market share and the company failed to disclose that it was about to recall 1,000 bikes in its ride-share program.

Tuesday, April 2, 2019

Slack Goes It Alone

In April 2018, Spotify underwent a direct listing on the NYSE. Now, it appears that corporate messaging service Slack will also undertake a direct listing. Both companies have sufficient cash on the balance sheet, which reduces the need to raise cash from a traditional IPO. The direct listing will provide liquidity for Slack's current shareholders and eliminate the floatation costs associated with an IPO. It will interesting to see if Slack initiates a stock buyback in the near future, similar to what Spotify did.

Monday, April 1, 2019

Lyft Stock Not Lifted

Ride sharing company Lyft went public on Friday. The stock price jumped as much as 23 percent, before falling to a gain of 9 percent. Today, the stock took a nose dive, dropping 11 percent, trading below its initial offering price. Lyft has yet to earn a profit, and recorded a loss of more than $900 million during 2018. How the Lyft IPO affects the decision to go public for other tech companies like Uber, Slack, and Pinterest is yet to be seen.

Hertz Tries A Clawback

Auto rental company Hertz is demanding the return of $70 million in incentive compensation to former CEO Mark Frissora and other senior executives. In 2014, Hertz disclosed that it would have to restate three years of accounting statements. Hertz is accusing former management of pressuring employees to use fraudulent and misleading accounting procedures that lead to the restatements. Hertz is also demanding that the executives return the severance pay received when they left the company after the accounting scandal was unearthed.

Thursday, March 21, 2019

Negative YTM Debt Increases

In 2016, there was a record $12.2 trillion in negative YTM debt worldwide. That amount had fallen, but in the last five months, more than $3 trillion more in debt has reverted to a negative yield, bringing the worldwide total back to $9.3 trillion. German government bonds are creeping close to negative yield territory, with yields of only .06 percent. It appears that at least some level of negative yielding debt will be around for a while.

Thursday, March 7, 2019

A Great Risk-Free Rate?

Generally, savings accounts are considered to be close to a risk-free investment. Given what you have learned about risk and return, you would expect a low return, and you would be right. Bankrate.com states that the current average savings account interest rate is .10 percent, although the highest rate offered is 2.35 percent. But what if you could get a 6.2 percent return on your savings account? You can with a BlockFi Interest Account. BlockFi allows you to deposit bitcoin or ether and will pay you a 6.2 percent APY (or EAR). BlockFi is regulated by the New York Department of Financial Services, but does not have the FDIC protection carried by most banks. As with banks, BlockFi depends on charging borrowers a higher rate than it pays to savers. Now the question remains: Is a savings account with BlockFi truly risk-free?