Feb 17, 2019

Debt issuance can make some of the largest brands look insolvent

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Data: FactSet; Chart: Harry Stevens/Axios

Many buybacks are funded with debt issuance. That increases a company's liabilities, and since the proceeds are used to buy stock that is then immediately canceled, it does nothing for the company's assets. The result is that under generally accepted accounting principles, the company's liabilities can end up exceeding its assets. Technically, that's the definition of insolvency.

The other side: The companies with the largest negative shareholders' equity also tend to own extremely valuable brands. If you included a reasonable brand value on the asset side of Starbucks' balance sheet, then it would no longer look insolvent. The same goes for most of the other companies on this list.

One curiosity: The buyback-happy company at the top of this list, Philip Morris International, was spun out of Altria in 2008, around the same time that Kraft was also spun out. But Kraft, having merged with Heinz, now finds itself at the other end of the league table, with $65.4 billion in shareholders' equity.

Trivia: Which company has the most shareholders' equity? That would be Berkshire Hathaway, on $375.6 billion.

Go deeper: Stock buybacks will be a hot-button 2020 issue

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World coronavirus updates: Governments tighten restrictions to curb cases surge

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

Japan's Prime Minister Shinzo Abe announced plans to declare a state of emergency and a 108 trillion yen ($990 billion) stimulus package Tuesday, as several governments announced new restrictions amid a jump in cases.

The big picture: The virus is confirmed to have killed almost 75,000 people and infected 1.3 million globally as of early Tuesday, per Johns Hopkins data. Spain has reported the most cases outside the U.S. (more than 136,000) and Italy the most deaths (over 16,000) as half the planet's population is now on lockdown.

Go deeperArrowUpdated 32 mins ago - Health

Boris Johnson in intensive care as coronavirus symptoms worsen

Photo: Peter Summers/Getty Images

U.K. Prime Minister Boris Johnson is being treated in the intensive care unit of St. Thomas' Hospital in London due to increasingly severe coronavirus symptoms.

What they're saying: Cabinet minister Michael Gove told LBC radio on Tuesday morning Johnson was not on a ventilator. "The prime minister has received some oxygen support and he is kept under, of course, close supervision," he said.

Go deeperArrowUpdated 1 hour ago - World

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 a.m. ET: 1,348,184— Total deaths: 74,834 — Total recoveries: 284,802Map.
  2. U.S.: Total confirmed cases as of 3 a.m. ET: 368,376 — Total deaths: 10,989 — Total recoveries: 19,828Map.
  3. Trump administration latest: President Trump's economic adviser Peter Navarro warned White House colleagues in late January the coronavirus could take over half a million American lives and cost close to $6 trillion, memos obtained by Axios show.
  4. 2020 update: Wisconsin Supreme Court blocks governor's attempt to delay in-person primary voting delayed until June.
  5. States latest: West Coast states send ventilators to New York and other states with more immediate need — Data suggest coronavirus curve may be flattening in New York, Gov. Andrew Cuomo said.
  6. World update: U.K. Prime Minister Boris Johnson moved to intensive care as coronavirus symptoms worsen.
  7. Stocks latest: The S&P 500 closed up 7% on Monday, while the Dow rose more than 1,500 points.
  8. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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