Stock market companies have seen their share prices crash heavily because of Covid-19. While much focus has been on how the US, EU or Irish exchequer is going to underwrite the crisis, how are large listed firms positioned to ride out this storm?
As US airlines say they need a $50bn (€47bn) state dig-out, many of those same firms spent billions of dollars buying back their own shares in the last eight years.
The big four US airlines, Delta, United, American and Southwest, which may run out of cash in a few months, have spent $43.7bn on share buybacks since 2012.
Share buybacks have boosted the performance of global stock markets to the tune of several trillion dollars. The markets have become so addicted to buybacks it has been suggested share prices will fall much further now because companies are no longer in a position to do them.
In 2019, American blue-chip firms spent $730bn buying back their own shares. This was slightly below the $806bn they spent in 2018. Instead of using that money for other purposes, such as R&D, wage increases, better pensions or expansion through acquisitions, major listed companies bought their own shares in the market.
This does two things. It reduces the number of shares in circulation, which boosts the earnings per share figure, and it supports the share price. But is it the best use of the companies' free cash flow?
Up until 1982, share buybacks were considered a form of market manipulation and they were actually illegal in the US.
A change in the rules envisaged buybacks as a safe harbour for firms to buy their own shares under certain conditions. The conditions have obviously become very loose.
Irish companies have not been immune to the buyback phenomenon either. Last year, Irish plcs spent €2bn buying back their own shares. Ryanair has spent €1.45bn in the last few years, while CRH has splashed out €1.6bn since 2018.
Despite this fact, both of these companies have sizeable cash reserves to weather this storm. But many big corporations do not.
As they slash employees' pay and let go huge numbers of staff, would the benefits of higher profits in recent years not have been better spent as a financial cushion?
Now there is a freeze on share buybacks as companies scramble to figure out how long this crisis might go on, and how much cash they have to get through it.
In the US, the freeze is being led by banks. Yet they have been major buyers of their own stock in recent years.
In their defence, boards will argue that buying back shares gives more flexibility than dividends and can be more tax-efficient for investors. They will also argue that in this era of low interest rates, keeping billions of euro in cash would not yield much return and could end up costing them money.
Equally, they will argue that nobody could have foreseen a global pandemic like this one.
Yet one company that has maintained vast amounts of cash and tradeable securities on its balance sheet is Apple. It is likely to be hit badly by the implications of the Covid-19 crisis, especially given the importance of China in its supply chain.
However, at the end of 2019, it had $39.7bn in cash, plus $67.4bn in 'marketable securities'. Not a bad situation to be in during a major economic shock.
Donald Trump is spoofing on big pharma move home to US
US president Donald Trump rattled more than a few cages during the week when he talked about the need to bring more pharmaceutical manufacturing home to America. He name-checked Ireland as doing a great job in producing so many pharmaceuticals for the US market, but wants more made at home. Any such move in the short term would be utterly reckless in the middle of a massive pandemic.
But if it became a goal for the medium term, it could have huge consequences for the sector in Ireland. Last year, Ireland exported $52bn worth of pharma products and the US was the biggest single market. The industry (and employees) here shouldn't be panicked just yet. Trump said when he became president that he wanted more manufacturing by US corporations to be done in America.
In the early days of 2017, there was talk of whether Apple would end up manufacturing iPhones in the US. It hasn't happened - at least not yet to any significant degree.
Pharmaceutical companies are here for a variety of reasons. The tax regime is one. But there are others, and not all pharma companies exporting to the US are actually American. Trump has said there are ways to bring production of pharma and medical devices back to America. He said the US government has been looking into it and it is something he has wanted for a long time.
But he hasn't said in detail what those measures might be. Companies would have to be forced or incentivised to do it.
Changes to the US corporate tax regime have provided some levelling out of incentives but they have not dramatically altered the FDI landscape for investment by US corporations as many expected.
Trump did allude to a possible executive order, suggested by one politician, which would ensure raw materials for pharmaceuticals and medical devices were made in the US because of the coronavirus.
Hi-tech multi-billion-euro manufacturing is not something you can just switch on and off. Whatever about finding ways to do this in the medium term, a short-term upheaval like that doesn't sound sensible on any level.
In one way, these soundings do not augur well for the future FDI into Ireland when this crisis settles down. Will we see supply chains altered around the globe so more goods are manufactured 'at home', whether that is in the US, the EU, China or anywhere else?
In reality, companies move to the most efficient and beneficial locations to source what they want. That doesn't always mean only the cheapest, as other factors are taken into account.
It is hard to envisage that boards of big corporations will retreat to more expensive domestic locations simply because of a possible future risk like a pandemic. And the Covid-19 crisis is happening everywhere anyway.
Many things will change when this is all over but perhaps global supply chains may not be revolutionised as much as many might think.
Who can afford 100pc pay cut?
It hasn't taken long for pay cuts to be implemented by employers, not only in Ireland but around the world. But how much of a pay cut should senior executives be willing to take? Australian airline Qantas, led by Dubliner Alan Joyce, has stood down 20,000 of its 30,000 employees without pay.
This is despite a AU$700m (€377m) state rescue package for the airline industry there.
Senior executives had already announced a 30pc pay cut for themselves earlier this month but that has changed to 100pc for the duration of the crisis.
The idea of senior executives working through this for nothing is admirable but it does raise questions about how much they have received in recent years. Who can work for nothing? Last year, Joyce enjoyed total remuneration of €12.8m. Oh, Joyce can.
Sunday Indo Business