you're a complete moron. Life is too short to argue with morons. I could be out mountain biking or playing my guitars yet I'm arguing w/you. Read PM's annual report and do research on why companies issue debt. I worked in the bond market a long time before retiring. I have no desire to teach an idiot who I don't like how the business world works. If it was such a bad move then short PM and put your money where mouth is.
OVERWEIGHT PM (LONG)
not dumb! they took on debt to issue bonds.
Yes everyone knows they have great cash flow and could buy shares back without taking on debt.
Buying shares back is nice for shareholders but taking out a second mortgage to do it does not help the business to grow as far as I can see.
If your so smart then explain how you pay me 6.75% so I lend you money to retire what your paying others 3.5% on makes you money?
If you buy the shares at 50$ and later sell them back at 100$ you could possibly come out ahead if the interest hasen't eaten into that to much.
Intel used to buy stock in other co. and it helped their profits untill the market went down, then it hurt.
Show me the math.
That last post was so dumb. PM issuing bonds is nothing like buying on margin. They issued the bond to buy back their own stock and shrink the float which is bullish. Beyond that they can afford to issue bonds because they defacate money. They make a fortune. My gosh...inform yourself.
kinda like buying on margin I guess. Then they have to sell them back at some point in time. I still dont like it and wish it was used to grow the business directly. Thanks much for your insight.
...or, if you believe the stock will go up substantially, you could borrow money at 6% and buy shares. Then, when they increase in value 20-50%, you have gained 15-45% return on your money.
Its like if I could get a car loan at 2.5% interest, why would I pay cash? I could invest the cash anywhere and make more than 2.5% interest...free money for me.
if your paying 3.5% div on shares then how does borrowing at 6.75% make sense to buy those shares back?
Why not buy shares out of cash flow directly and save the costs?
If they had not said a stock buyback I would have assumed it was to grow the business and I would be all for it.
I thought old co. with little growth potential did this sort of thing.
I freely admit to not having any business education so i'm hoping you guys can explain.
I sold bonds for a long time and was good at it (no longer work on wall street). This bond offering is hugely positive. Not only does it raise several billion (some of which will be used for buyback) buy it makes this cash making machine of an international company(160 countries) a true cash powerhouse. They will have tons of cash while making tons of cash. They will easily sell these bonds because of their great financials also. This puppy will take off soon. Beware mrkt manipulation and just hold your stock and you'll have a great investment for a long time.
it pissed me off too especially to know they were going to use some of the proceeds for daily operations (doesn't all their profit mean something?) Also they are going to use it to buy back stock. Ideally, a company does this with free cash flow. Nonetheless, it is good in this respect. These bonds are in demand because they are considered high quality and the company knows they can raise the cash they need. But it pissed me off to read this after hours.
You guys are retarded. This has been in the works since the split. Hell, this is one of the major reasons for the split!
This company has very little debt. They are merely bringing their balance sheet in line with a lower cost of capital. The debt offering gives them (even MORE) oodles of cash to do whatever they want. Did they need the $? No. But why not employ some debt in the capital structure and reduce equity ownership? This means more PROFIT for all the equity owners (since there will be fewer of them).
As equity holders, you should be jumping up and down about this. In fact. You should be pissed they didn't raise MORE debt.
I don't know why this is so troublesome. The mkt has known that PM was going to issue debt to fund stock buyback. Since PM will generate significant free cash flow, servicing the debt should not be a problem. So, it makes sense for PM to issue debt which both has a lower required rate of return than equity and where interest expense is tax deductible in order to buy back stock.
Also, the issue of using debt for daily operations....Well that is a blanket statement that just about every company which issues public debt includes so that the company has flexibility with how it manages the proceeds. It is a non-issue.