Boeing to sell at least $10B in shares to plug cash drain

Not a bad move considering Dow and S&P are at all time highs.

Gosh, would be real cool if they hadn't bought all those shares, and just had the cash on hand to help... I don't know... invest in engineering and making planes fly with doors on them.

The only question I have is, if I buy this garbage, will the government bail me out and then some, and make it profitable to buy stock in this incredibly poorly led company?

but Boeing's stock is down

and selling $10B in shares will drive it down further

That would require thinking more than 1 quarter ahead, and their leadership clearly doesn’t have that many context tokens.

Boeing: “We buy high and sell low.”

From my experience, the only real way to make money on that kind of thing is either own metric shittons of the stock, or be paid big money by the company whilst all the shenanigans are going on.

Any company that’s too important to fail needs to be split into smaller pieces

so? you just reverse stock split until your stock price is back to normal.

No. Ask anyone who owned GM stock at the start of the great recession.

Came here to ask the same question.

My intuition is yes -- Boeing is America's last / only major commercial aviation jet mfr. -- and I don't think Uncle Sam will let them fail. Economically, I disagree with such a policy, but there's no reason I shouldn't profit from it.

I honestly think their leadership could be replaced with an LLM at this point.

It's hard to believe that despite all the bad news and scandal, the stock is higher than it was in 2015 and is in the same 100-200 dollar range.

It is already priced in and the stock is clearly not lower. Selling stock to raise capital is possibly good news compared to alternatives

An excellent point. Anyone who held common stock of GM pre-bailout saw that stock fall to zero

Exactly. A bailout means the underlying business is restructured or wound-down; shareholders, bond holders typically get zip

As they should.

Investments by definition is a risk. If you want garunteed returns use a savings account or GIC.

That's a terrible reason to buy a company, it's completely unrelated! You could just as well argue it's a terrible time to buy a struggling company, because the market is likely to drop, so you should have waited until then. The real question is, is this company a good quality company likely to grow in the future? (Or if you are the gambling type, "do I think this stock will go up?") The, secondarily, "is the price reasonable?"

I think it is clear the Boeing is not a good quality company at this time, and the fact that they have a cash-flow problem is not encouraging, since it means they are one step away from bankruptcy restructuring.

This is fine, this is what issuing shares is for. Raising money is the reason why companies do this at all. There's an argument to be made that they're running the company poorly (that I don't totally subscribe to), but this is the whole reason the stock market exists.

Speaking abstractly,Why would that be any better?

Why keep the cash on hand when you can raise cash.

I get that people have an emotional reaction to Boeing, but it's not like owning 10 billion dollars of Treasury bonds would have prevented a door plug blowout

You're not supposed to use the $10B to buy treasury bonds.. you're supposed to use it on R&D, manufacturing, QC, etc...

I think his point is that it's a bullish market, so they will find plenty of buyers

> That's a terrible reason to buy a company...

Perhaps. But it is an excellent reason to sell a company - which Boeing is doing, by selling shares.

Perhaps due to inflation?

Who decided that's what they were supposed to do with it?

The fact that they are having to sell these shares to try to right the ship means the market decided. Otherwise they could just keep extracting as much profit as possible.

Oddly enough people that fly on planes want to be confident that the planes will work.

You misunderstood the article, Boeing is issuing new shares in order to bolster their cash on hand inventory. They’re issuing shares that didn’t exist before to raise new capital.

> and I don't think Uncle Sam will let them fail

That is a metaphysical certitude.

I read it as it being a good time for Boeing to sell stock, given that the market is so high.

If you have a company and you think it is overpriced, that means it's a good time to issue stock and convert share price to cash.

Tesla is one of the best examples of in history of companies doing this. They used the inelasticity of Tesla stock price to raise tens of billions of dollars in secondary stock offerings after their IPO

Is there any hope for a new, homegrown aerospace U.S. company in this day and age? This decadent beast needs to be put out of its misery but it seems to be the only one we've got left...

Stock price is irrelevant in isolation.

It's not an emotional reaction to Boeing, it's a logical reaction to the fact that stock buybacks are a blatant form of market manipulation that were illegal for most of the 20th century. Nobody should be doing them, it's nothing to do with Boeing specifically. Buybacks are almost always bad for employees, customers, and if you're a big enough corporation, the world.

> it's not like owning 10 billion dollars of Treasury bonds would have prevented a door plug blowout

I doubt today's announcement is any kind of endorsement by the company about its past foolishness.

I think the assumption here is that, in the past, more money should have been dedicated to ensuring high airplane reliability instead of company profits. And if that had been done, the door plug blowout wouldn't have happened.

P.S.: I'll call it how I see it: it wasn't merely foolishness, it was evil. They prioritized their own profits over the public safety with which they were entrusted.

Misunderstood the finances, more likely. The difference between selling existing shares and creating new shares is complicated.

"Don't be snarky."

"A good critical comment teaches us something."

https://news.ycombinator.com/newsguidelines.html

(p.s. not defending boeing - just hn thread quality)

wat, we have plenty of aerospace companies, Boeing is the only one making consumer air travel jets right now, but they're far from the only aerospace company in the US

The parents said cash on hand.

You are proposing a third hypothetical. Would Boeing being a better position today if they had spent 10 billion dollars yesterday? Maybe, maybe not.

I find it interesting how people tend to reduce everything to money, as if it is a solution to everything. Not all problems are financial problems that can be fixed with more funds. It matters how you spend those funds.

One of the big problems with Boeing is that they had two parallel quality systems with imperfect and overlapping reporting. I'm sure they could have spent twice as much and had four overlapping quality systems, but I'm not confident that would improve reliability opposed to reduce it.

If the solution to everything was money, companies like wework, quibi, or theranos would just need more investment.

Not everything is a money problem

Boeing did that - they split off part of their manufacturing. That, um, had some downsides in terms of quality of the finished plane - which is a really bad thing to have quality issues in.

Negative reaction to stock BuyBacks are also emotional and irrational. I've never heard anyone articulate a cogent argument why they are worse than paying a dividend.

In case you're getting that from my GP post, let me clarify.

I believe that in this particular situation, Boeing intentionally cut some safety corners to improve their profitability:

1) Pushed their airplane production rate so high that many of their workers didn't believe they were producing safe airplanes.

2) Took various steps to convince the FAA to allow the 737 MAX to fly with the same type rating as other 737s, despite it being pretty clear to outsiders that MCAS warranted additional training.

3) Fired QA staff / whistle-blowers for raising legitimate concerns.

4) Chose to not halt production to address safety concerns that had been raised.

I'm arguing that every one of those choices was ultimately made to maximize Boeing profits.

Certainly there are some situations where money can't magically fix a problem. But in my judgement this isn't one of them.

How does one make money from owning s** tons of stock during a restructuring? Do you have any examples

What if being split up is a failure mode as well?

Boeing did $43B of stock buybacks in the 2010s. In practical terms those shares did exist before.

I don't know whether they retired the stock they bought back or put them back into the treasury, but in practice it's basically the same thing. Shares are fungible.

I come at it more from the angle of quality culture. I have been in big companies and small ones, and my experience is that quality is a function of engineering culture and structure, not funding.

Similarly, very few companies intentionally cut corners and trade quality risk for profit. Instead, they become bad at understanding, managing, and communicating quality risk. It is a type of governance problem, but a much more nuanced one than simple greed. Afterall, quality is a tool to ensure profits. Instead, I think it often a story of bad hiring, botched policy changes, and slow decay of organizational competency. Often times, this is the direct result of trying to throw dumb money at a problem.

Unless they force their employees to buy them, their share price will crater.

space-x enter chat.

> I read it as it being a good time for Boeing to sell stock, given that the market is so high.

This is exactly what I meant.

How do we know this isn't more fraud?

Shares are not fungible, these are not NFTs. The accounting nuances of how the buybacks are handled is not relevant here.

The issuance of new shares requieres new legal docs, and is constrained by the article of incorporation. A company will have to amend their articles of incorporation to issue shares beyond the allotted amount decided at the time the docs were created/filed.

I think you misunderstand my comment.

Boeing has famously done stock buybacks of $43 Billion for the period of 2013-2019. Now they need to raise $10 Billion in cash. Whether they're doing that by issuing new stock or by selling bought stock is moot.

They converted $43 Billion dollars into stock (probably more since then, but let's make the point), raising their market cap from $57B in 2013 to $93B today. Which is a difference of $36B[1]. So they converted $43B in 2013 into $36B in 2024. It's worse than that, because if you account for inflation since 2019, The $36B is actually only equivalent to $28.8B [2] of the dollars that they spent on it.

This means, that in the period from 2013-2019 Boeing lost ~$14B in cash by spending it on stock buybacks.

My comment here is just that. They converted $43B cash (probably more) into $29B stock value. And now they need $10B cash. For which they will issue new stock, and likely tank the stock value even more. I would be surprised if there's enough float that they wouldn't just destroy the stock value entirely by trying to issue ($10B/154($/stk)) == 64M Stock. Their average volume (I assume float) is 9M according to Google stock, but they also say 20+M for the past few years. So I'm guessing we could see Boeing stock drop by half for this round of sales.

[1] https://www.macrotrends.net/stocks/charts/BA/boeing/market-c... [2] https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=36%2C000.00&ye...

I think snarkiness is particularly bad in discussions with people. But my comment isn't directed at a person. It's an invitation for us as a society to think about the long term consequences of stock buybacks. Please see the follow on discussion's about this topic. I think this is better comment thread quality than we'd get out of a plane (:D) dry comment about the numbers (which I incidentally also have below).

Also, I believe this comment is critical of stock buybacks, but it is not explicit about that. I leave that as an exercise to the reader.

That said, I will consider in the future less snarkiness in my comments.

"Shares are not fungible, these are not NFTs. "

This sentence is contradictory. Shares are either fungible (they are), or they're not, in which case they are 'non-fungible', like "non-fungible tokens."

In this case they are, because one share is like another. If you and I both have boeing shares, we can trade one for the other, and still feel like we got a fair trade. Additionally Boeing has the ability to mint new shares. And if they do that, they mint shares like yours and mine.

The alternative to BuyBacks doesn't have to be a dividend... But yeah, if those are the only 2 options you're thinking of I could see why this looks emotional and irrational.

I could imagine 2 other possibilities that I like better:

#1, The government could reclaim that money as taxes. #2, Companies could invest that into R&D and new technologies... Like say, greener planes? That would be really cool for the last 12 years.

There has to be more to life than 'value to the shareholders'. We can do so much better than this as a society.