Management are rich so they obviously are financial and business geniuses, so it can't have been mismanagement - they must be some external factor to blame.

Ozempic seems like a pretty good fall guy for this one.

The amount of companies going bankrupt because the board has taken all their money seems very high.

Don't forget the companies where Private Equity swoops in and takes all their money.

We seem to be squarely in the "loot all the well known brands, take whatever is not nailed down, and leave their carcasses by the side of the road" stage of Capitalism.

Where does it go from here? It seems grim.

Hopefully new upstarts with a vision for quality.

It seems that every brand starts out with noble intentions, then after rising to meteoric success, they get gutted and we have to wait for the new, high quality up start.

> taking on $1.5 billion dollars of debt to buy back shares near all-time highs

> To this day they still carry over a billion dollars in debt.

Bankruptcy sounds like the only option, but the initial borrowing sounds like incredible mismanagement.

Generating shareholder value while wiping out twenty thousand jobs, killing the business and eventually going bankrupt. The epitome of business success

I think that's "extracting" shareholder value.

Like extracting value from a patient in the form of removable organs.

In theory extracting multiple organs from one person will save more people than it kills.

But that isn't really true when you're talking about plays like this. More people are made worse off than better.

Literally the phrase is "unlocking brand value"

"brand value" -> trust people have in the company/product

"unlocking" -> betraying that trust in a bustout

But they didn't, as evidenced by the bankruptcy.

The whole, everything stupid a company does is "increasing shareholder value" meme is annoying. Not every dumb action a company does can be explained that way.

> But they didn't, as evidenced by the bankruptcy.

When shareholder value is used as short term and long term interchangeably, both can be true. Short term value at the cost of long term value.

Plenty of dumb decisions burn through long-term value while generating negative-to-near-zero short-term value.

They do sometimes (but not always) generate plenty of value for the people making those decisions.

Yup, the buybacks were made to produce short term shareholder value, those who sold and took their bags won, those who stayed got screwed, classic private equity playbook.

> I'm not sure why this is being framed as an Ozempic story

I am. Because just like how I've always got someone else to blame for why I never cleaned my room, executives can always find someone else to blame for why the business they are running went to shit.

And the press loves to run with a good just-so story that paints some indefatigable foreign villain as the cause of a company's demise, instead of boring, banal mismanagement.

> near all-time highs

Because of inflation and market growth, a company that isn't shrinking should usually be sorta close to an all-time high.

What's the argument for stock buyback programs generally? We have more cash than we know how to spend reasonably?

It's like a tax free dividend. Dividends are taxable but if a company uses the cash they would have spent on a dividend on a buy back there's no taxable event for the investors. Those investors who want the cash can sell and pay the tax and the rest enjoy the higher share price

Incentivizing short-term investors to dump stock by boosting the price temporarily? I guess that's a strategy.

In a purely rational market, buying back shares doesn't boost stock price temporarily... it boosts it forever. You buy back shares and 'retire' them, thereby making everyone else's shares more valuable.

Now, if you're using debt to finance share buy backs, then yeah... it's a short term ploy. But most companies don't use buy backs this way.

> You buy back shares and 'retire' them, thereby making everyone else's shares more valuable.

But the cash outflow to purchase those shares makes the company less valuable at the same time. In a completely efficient market, the amount of money that the company pays to buy back a share should be exactly balanced by the ownership percentage of that share, resulting in no net change to the price of the company's other shares.

Yes but as a shareholder I get an untaxed unrealised capital gain instead of a taxable dividend. I’m not a fan of taxing unrealised capital gains but this particular loophole could do with closing

But the tax will be paid when the stock is sold. It is more like letting the investor choose when to realise the gain and trigger the tax vs dividend that will happen regardless of wether the investor needs the money at that time or not.

Or the stock is used as collateral for a tax free loan and never sold. Tax loophole engaged!

The loan may be tax free, but it is surely not interest free.

For the ultra-wealthy, it doesn't matter. Look up "Buy, borrow, die".

People who talk about "buy, borrow, die" never seem to mention interest.

Suppose your blended portfolio grows at 10%/year nominal, and you're in the 20% capital gains bracket. Then you would owe 2%/year taxes if you realized it every year. Would you not then need an interest rate lower than 2% nominal (i.e. 0% real, assuming 2% target inflation) to come out ahead? That's also assuming you're not already receiving some dividends/income or can't be selective about tax lots to sell.

You could say "well you can simply accumulate an interest balance without ever repaying the loan, and hope the assets appreciate faster than the interest compounds", but then shouldn't you have already levered up prior to ever considering taxes? So taking on additional loans pushes you outside of your risk tolerance? Do you borrow or pay taxes depending on your portfolio performance? How does this work?

I'd be interested in seeing what someone with an actual finance background has to say about this "strategy". The popular image is just "free money", but while I have enough assets to start buying things with margin loans myself, I'm failing to see how to get some of that free money.

It seems generally reasonable that using an asset to collateralize a loan should be a taxable event, but the narrative about how this gets used seems off to me when trying to figure out the details.

> Suppose your blended portfolio grows at 10%/year nominal, and you're in the 20% capital gains bracket. Then you would owe 2%/year taxes. Would you not then need an interest rate lower than 2% nominal (i.e. 0% real, assuming 2% target inflation) to come out ahead?

You're assuming that someone has a portfolio that has a cost basis that is very close to the current market value. Most ultra wealthy folks have holdings that have been held onto for a very long time, with cost basis' that might as well be $0 compared to the value of the assets. Even non-wealthy folks that saved in a traditional brokerage would have a cost basis that is very low compared to the value of the assets. During the 'accumulation' phase, there likely is not much being sold at all.

If you want to access this capital, then you're paying 20% on every dollar. You don't need a 2% interest rate to make out ahead in this situation, it can be substantially higher and still be a better deal than paying the cap gains taxes.

There isn’t much publicly-available information with hard numbers (probably on purpose), but it appears that you need a huge amount of unrealized gains for buy-borrow-die to make sense. This implies that it is a very expensive scheme to run.

If you pay 50 cents to a financial service provider to avoid paying 1 dollar to the government, you’ve definitely come out ahead and the government has definitely lost. But the real winner is probably the financial service provider that is mostly pushing paper around rather than figuring out how to create the multi-billion dollar business that is needed to start the whole process in the first place.

I suppose it depends on how spectacular your buying is (a common criticism of sales tax is that rich people don't buy much, relatively), but wouldn't you only need enough tax lots that are close to current market value? If you've been accumulating, you've probably got a blend of tax lots from "nearly 0 gain" to "nearly all gain". You're also going to be receiving some dividends or have some other income sources that you presumably re-invest to create recent tax lots. The only case where that wouldn't happen is if you got lucky on a concentrated bet you made. If you inherited your wealth, you got your step-up, so you're faced on day one with "okay I have tons of assets with cost-basis at market value, how do I do rich person tricks?" Is that group not a good fit for buy-borrow-die, and it only works for founders/early investors of companies that blew up?

Taking on loans also means you're adjusting how leveraged you are, so I feel like there's a missing risk analysis component here. Otherwise of course I'd just take out as many loans as I could right now to get that sweet 10% expected growth at only 6% interest or whatever. So I can't borrow to avoid the tax man because I already borrowed as much as people are willing to give me.

> Yes but as a shareholder I get an untaxed unrealised capital gain instead of a taxable dividend

In the US, stock buybacks are taxed. But, its a fairly negligible amount (1%).

To close the loophole, ban buybacks. Or at least severely restrict them in some way. If a company wants to return profits let them issue dividends.

Yes.

If you have more money than you're able to make good use of improving the company (r&d, acquisitions, new locations, whatever), you can give it back to investors. Which can be either a dividend or a buyback, and in theory (ie, ignoring pesky details like taxes) those are supposed to be equivalent.

An enterprise can be financed with debt or equity. Issuing debt to buy back shares is simply changing the capital structure of the firm.

It lacks a moral component.

It can also be that the company leadership thinks the stock is undervalued.

> invest the money in the market?

Unless you're Berkshire, most investors don't want this. They buy a company for its success in widgetry. If they wanted to pay someone to invest in the market, they'd buy an actively managed fund.

That's silly. It's a business, not a charity. When I'm a shareholder in a business I don't want management wasting my capital by investing it in the stock market when they run out of growth opportunities. Just give me the cash back (preferably in the form of stock buy backs) and then I can invest that cash in other businesses myself.

> Give shareholders the right to vote on buybacks.

I like the idea of giving long-term shareholders an easier way to weigh in on buybacks.

No need. They aren't forced to change their % ownership and if they think the price is too high they should sell anyway.

> I'm not sure why this is being framed as an Ozempic story

Look at all the comments discussing the drug instead of the company. If there is a topic people are interested in, stuff it in the headline.

Stock buybacks are substantially equivalent to dividends. You issue a dividend when you have nothing to invest in that will develop shareholder value. Buybacks work the same way. You have a stock of capital, or a great borrowing opportunity, and nothing to do with it.

Most companies always have another idea to do a new thing, that might induce growth. WW did not. WW has been in trouble for decades, because their business model pre-supposes consumers are too stupid to use a search engine. (Does "weight watchers" work? No. No it doesn't.)

The debt-for-buyback swap is a symptom, not a cause. Management had nowhere to go, no vision for growth, and when you are out of ideas and you are offered an attractive loan, you do a buyback.

> Stock buybacks are substantially equivalent to dividends

There's a whole theory on this:

https://www.investopedia.com/terms/d/dividendirrelevance.asp

The easy way to see it is if all shareholders reinvest dividends, it's the same as a share buyback, only with the broker buying shares on your behalf rather than the company, and your ownership of the company includes a bonus fractional share.

Dividends are also a bit of an accounting game. You can pay yourself a "dividend" whenever you want buy selling shares. This is only 95% true, but if your share in a company just entitled you to 65 cents, the share is probably worth about 65 cents less since the money came from somewhere.

Buybacks also protect you from hostile takeovers, or from a competitor buying shares until they are entitled to a seat on the board.

The latter was the the end of several large German companies.

A company can also decide to do stock buybacks if the leadership thinks its stock is undervalued.

Because revenue took a very sharp decline when ozempic was approved.... which caused it to not be able to service debt. The company is worth zero. It was worth zero the minute the GLP-1s became viable. Whether it was financed with debt or equity matters not.