Our leading accountant and tax specialist doesn\’t know the difference between a dividend and a buyback

Ritchie:

Can News Corp pay a special dividend when the demand for cash to pay compensation and fines is not known?

Err, what special dividend is that? As he himself points out:

News Corp has announced plans to buy back $5bn (£3.2bn) of its shares in an attempt to halt the slide in value of Rupert Murdoch’s media empire.

So there you have it. The man who would remake the global financial system in his own image cannot tell the difference between a dividend, special or not, and a share buyback.

Why is anyone at all paying attention to his prognostications?

14 thoughts on “Our leading accountant and tax specialist doesn\’t know the difference between a dividend and a buyback”

  1. “Why is anyone at all paying attention to his prognostications?”

    Why does anyone slow down to look at a road accident?

  2. I yield to none in my estimation of That Man’s idiocy, but any corporate finance course will teach you that a share buy-back is a tax-efficient means of paying a dividend – it gives your shareholders a non-taxable (until it’s realised by selling the shares) gain rather than an instantly taxable cash inflow

  3. You are perhaps too kind Tim. The alternative explanation would be that Murph would know the difference if he stopped to think for a moment.
    But he never does stop to think for a moment.
    So a buyback is a divident, a request for clarification is a right-wing troll, and a proposal to copy the Swedish model is an extremist Libertoon that needs shut down to protect democracy.
    And why no need to stop and think for a moment? It’s the insidious, righteous arrogance that says he *knows* the answer. He doesn’t need to stop and think. He just *knows*.
    How odious. How very British left.

  4. Arnald……

    Comment is Free, but Facts are a Neo imperialist Construct, Homophobic and Racist, the Result of Capitalist False Consciousness.

  5. @Flatcap Army

    A share buyback is “the same as a dividend” only for the shareholders who sell their shares, not for the shareholders who hold onto them, but the crucial difference between a share buyback and dividend is that the shareholder gets to choose whether to take the extra cash or stick with the shares.

    Which is of course irrelevant to News International because the value of the fines etc that might ever accrue in the UK are piffling compared to the market value of NI, and the maximum amount of any losses that couuld be sustained by the parent would be limited to the share capital of NI(UK).

  6. @Alex – yes it is, but it isn’t irrelevant to those shareholders who stay on board as they should, in total, see an increase in the value of their shares equal to the value of the buyback

  7. “@Alex – yes it is, but it isn’t irrelevant to those shareholders who stay on board as they should, in total, see an increase in the value of their shares equal to the value of the buyback”

    Minus the value of the cash paid out by the company to buy back the shares, so all things being equal (and the shares fairly priced) there shouldn’t be much of a difference in the share price .. but it does make a difference when

    1) the company think the shares are under valued, or
    2) there is a tax difference between share buybacks (capital gain) and dividends (income), or
    3) there is a substantial proportion of shareholders looking to the exit that would depress the market price (see 1 above).

  8. Like yeah they are different things but why should this change whether or not they should be allowed to be giving money (in some form) to share holders instead of waiting until the fines have been levied.

    Tim adds: There is in fact a major difference between the two. You must have accumulated profits to be able to pay a dividend. This isn’t true of a share buyback.

  9. Share buybacks are common in the US because of the punitive double tax that dividends suffer (a distortionary tax that was briefly fixed under the Bush regime, something that Guardianistas scream about to this day as “tax cuts for the rich”).

  10. “instead of waiting until the fines have been levied.”

    How long would you like them to wait for fines to be levied, bearing in mind that tedious due process of investigation, prosecution, trial and other right-wing delaying tactics?

  11. Which is of course irrelevant to News International because the value of the fines etc that might ever accrue in the UK are piffling compared to the market value of NI

    Well, except that US law allows US victims of NI’s practices (of which it appears that there are some, although so far poxy slebs rather than 9/11 victims and dead soldiers) to sue News Corp in US courts.

Leave a Reply

Your email address will not be published. Required fields are marked *