...I am not interested to buy any company that has lost its way regardless of how cheap they've become and even if they offer multi-bag potentials at that point.
In today's issue of "everything that's wrong with America's capital markets," we present the curious case study of Boeing.
Over the last decade, $BA management spent $43 billion buying back shares at an average price of over $220. Along the way, it racked up $57 billion in debt. Fast forward to this morning, and $BA announced a massive 90 million share offering at $155. That's 30% below the price where $BA spent billions buying back its shares over the last decade.
This "buy high, sell low" strategy has now erased the entire last decade of $BA's debt-fueled buyback spree. Meanwhile, all the debt $BA accumulated is here to stay - running at $2.6 billion per year and counting. Of course, the $BA executives that cashed out hundreds of millions in stock options along the way - option grants that were made possible by the EPS manipulation of debt-funded buybacks - won't sweat it. They've already cashed out on a decade worth of stock comp... and will continue getting new options struck at ever-low stock prices. Heads they win, tails they don't lose.
Who loses?
The long suffering $BA shareholders, and ultimately, the employees who will get laid off as $BA enters into a liquidity death spiral. It's casino capitalism at it's finest. Management teams gamble the future of company with shareholder capital, get rich when it works, and don't lose a dime when it inevitably blows up.
Meanwhile, the Wall Street analysts who recommended buying Boeing the whole way down won't lose a nights sleep or a day's pay, either. We began writing about Boeing's coming demise back in January 2023, a time when precisely 0 of the 25 highly-paid Wall Street analysts covering the stock had a sell rating. Did it require any stroke of brilliance to see the writing on the wall for $BA back then? No, it was simply a matter of incentives. We don't get paid to shill securities from corporate America onto unsuspecting investors; we only get paid to be right.
Wall Street, on the other hand, gets paid by convincing you dear customer, to buy the securities that companies like $BA are selling. And it doesn't matter how rotten the merchandise is, so long as they can move money from point A to point B - they collect their 7 figure bonuses by taking out fat fees along the way.
That's why Wall Street will keep recommending the stock all the way down into the dustbin of history. Because even when $BA ultimately needs to get bailed out by Uncle Sam, there will still be money to be made in the bankruptcy proceedings.
