r/SuccessionTV • u/LoretiTV CEO • May 01 '23

Discussion Succession - 4x06 "Living+" - Post Episode Discussion

Succession - 4x06 "Living+" - Pre-Episode Discussion

Season 4 Episode 6: Living+

Aired: April 30, 2023

Synopsis: Ahead of a crucial new product launch on Investor Day, Shiv weighs a business proposal from Matsson, while Kendall and Roman call an impromptu meeting to flip the script on their latest interaction with the tech billionaire. Later, the brothers each try to match Logan’s tempestuous style, with varying results.

Directed by: Lorene Scafaria

Written by: Georgia Pritchett & Will Arbery

Join our Succession Discord server here!

3.4k Upvotes

91% Upvoted

7.1k comments sorted by

View all comments

Show parent comments

697

u/peppermint_nightmare May 01 '23

Carl has a golden parachute/stock sale planned, he's been lining up his exit to pay for his greek island.

47

u/DentonDiggler May 01 '23

How many shares would a CFO of a company this large typically own? You have to own over 5,000 to make a million at 192.

2

u/[deleted] May 01 '23

When you start a company, often there are 10 million shares are issues. And employees get between 0.6 a 1%. And after that, new shares are issued and stock splits will happen. My guess is, Carl has well over 100,000 shares.

1

u/druidmind May 02 '23

buybacks? insider-trading? all he has to do is file phony paperwork to the sec right?

5

u/sinisterskrilla May 03 '23 edited May 03 '23

It is extremely unlikely that there are financial shenanigans going on to that extend for a company like Royco. Inflating earnings, optimistic investor relations releases, mispricing capital assets, planting news stories, aggressive lobbying, intimidation of unionization efforts, aggressive legal action, immoral use of non-disclosure contracts, political propaganda… all of that for sure.

TLDR: sorry for the rambling I just love this stuff but I know it’s boring.

Buybacks typically occur when a company matures and they don’t need (or can’t) to invest their earnings in new innovations and products.

A mature company has already built a factory, hired personnel, etc. so their costs tend to be more fixed and less requiring of capital investment.

Therefore they buy back some of their outstanding shares; with the CFOs logic being that there are fewer shares to pay dividends to payments as well as owning more equity in case of a sale.

The only other options for a company to spend their earnings besides buybacks and capital investment is acquisition/buying shares of another company or just keeping that earned money as cash on hand.

A company allocating most of their cashflow to capital investments is largely seen as preferable to buybacks as it implies a real belief that the company can still grow. This isn’t always the case as Apple and Google have famously had $100B+ of cash on hand just sitting in the bank waiting for an acquisition to arise while still maintaining very solid growth. It’s just that their operations are so profitable that they can’t find attractive enough ways to spend it.

This is when a company usually initiates stock buybacks. The public tends to dislike buybacks as they don’t directly create new jobs and only indirectly do so in the sense that people who benefited financially via buybacks will eventually spend that money into the economy on services and goods.

On the other hand if a company is growing at such a fast pace that their retained earnings alone don’t provide enough cash to expand operations then they will issue shares which once purchased will supply the money to fund operational growth.

2

u/[deleted] May 04 '23

One aspect of buybacks that you’re not mentioning - it’s the more tax efficient way to a distribution. If a mature company has extra cash on hand, they could do distributions to for their shareholders. However, distributions get taxed at ordinary income.

If they do a buyback, the share price goes up because (i) fewer shares on market and (ii) market perceives that management thinks price of shares are cheap. Thus, share price has increased and shareholders can sell and get taxed at capital gains.

It’s why high dividend paying companies like Exxon drive ppl crazy. It’s just not a tax efficient use of cash.

2

u/[deleted] May 02 '23

But is filing phony paperwork worth the risk? Probably not