@plawolf
I must admit I did not use the best analogy, but a share in a company is not a one-off discrete transaction. When you buy a share, you technically buy ownership of a tiny percentage of the company, and whoever holds those shares have a continuing, ongoing stake within the company.
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Sort of agree with you, except for the one off discrete bit. Yes you are buying into a stake in the company, but it is still a one-off purchase. You can't buy more of the "same company". I hope you know what I mean. You can buy more of the company as in more shares, but you can't buy more of the same share you already bought. So technically it is a one-off discrete purchase.
In addition, when a company issues shares, it records the issue value as a liability in its accounts (Which never reflects the stock market share price, but it is still recognised as a continuing liability).
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No, disagree completely! In accounting, there is a thing called the accounting equation. (It is basically trying to be smart, like as in Einstein's e=mc2 type of equation)
The accounting equation is asset-liability=capital.
Therefore, shares receipts are written down as capital. Not liability. Therefore if a company owns 10 trucks worth £10,000 each, and have a £20,000 loan from the bank. The asset is £100,000 - liability of £20,000 = capital of £80,000 This £80,000 represent the capital of investors buying shares worth £80,000 to enable the company to buy assets. So shares is entered in accounts as capital! NEVER liability. Which is why we call it "balance sheet". It must always balance. USA term is statement of financial position.
While it is true that normally a company is not under any obligation to buy back already issued shares, indeed most companies usually make additional share offerings to raise additional capital.
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Agree.
However, in the very limited scope of delisting from stock exchanges, there is no real precedent that I can think of involving governments forcing profitable, solvent companies to de-list, so I was going off voluntarily de-listing rules, which required the company buy back existing issued shares at market value or above (determined by negotiations between the company and shareholders) in order to de-list, which is what I think the US government would do, as I don’t see them burning American investors just to be fair to Chinese companies.
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Listing is a private matter in a free market environment. Government have no roles to play except law that governs the stock market. It is between the company and the stock market. If for whatever reasons the company wishing to delist or was forced to delist by the stock market or it's regulators, companies still are not under any obligation to repurchase the shares. The reason is simple, as per my example above, the only way a company from my example above can buy back those shares, all things being equal, is to sell assets (it's trucks) to raise money to buy back those shares. In doing so the company cease to exist. You could argue, they could raise funds by borrowing. But under this circumstance, nobody us going to lend them a dime.
So that's why in situation like that describe above, it is the investors that's taking the risk. (But then again they should, as they normally get a bigger reward than just putting their money in the bank).
The only other example I can think of is in the case of bankruptcy/insolvency, whereby if there are any assets/value left after a company has been wound up and all other creditors have taken their due, shareholders can take a share of what is left proportional to their share holdings.
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Agree. Except, there are different types of creditors, the first in line with the begging bowl will be government tax authority followed by local government. They usually gets 100% of their due. And then the rest is pro rata to the holdings. And preferential creditors gets first bite. By the time it filters down to ordinary shareholders, it usually in my experience won't be anything left.
But either way, I fully expect Trump to try to screw Chinese companies any and every which way he can, so I absolutely expect him to try to force Chinese companies to pay through the nose to buy back shares from American shareholders. As such, I actually expect the stock price of some Chinese companies with significant assets in the US or US allied territories to go up if Trump makes any concrete moves to put his threats into action as American investors would expect the US government to try to create a massive payday for them through these forced delistings.
Asset seizures would be a given, but the US may also use blackmail to try to force Chinese companies to buy back already issued shares at vastly inflated prices, like threatening to put them on sanction lists, thereby threatening fines and extradition for anyone who trades with those companies worldwide, thereby threatening their international trade if they don’t cough up their lunch money.
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Not sure what presidential powers are available to him. I know they (the USA government) can seize foreign assets, and have done so in the past.
However, the fact that these Chinese companies have done absolutely nothing wrong or illegal would mean the Europeans are extremely unlikely to go along with this. As they would worry their companies would be on the receiving end of such threats if they allowed the US to set such a precedent. Ironically, if Trump presses ahead with this, it will massively spur the development of a parallel international trading system outside of American control and influence, and be another major blow to both the Dollar and the American stock market.
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Agree, it won't bold well for them. Although they have precedent as I said above. But it is usually with some "justifiable" excuse and it is quite small as not to give the market the jitters. But with China, they might rick market confidence.
Ok. I copy and paste your text and my reply individually to each paragraphs. Hope this make it easier to read.
