As crisis-induced fear fades, companies take on more leverage ... Companies are increasing their borrowing for three main reasons. The most obvious is that interest rates are low, meaning a key cost, borrowed money, can be obtained cheaply. That can result in higher returns to shareholders. Moreover, rates are likely to rise, which is encouraging companies to lock in low rates while they can. ... A second driver is the resurgence of activist investors which, emboldened by a benign economic environment, are pushing firms to return to shareholders cash that had been retained for a rainy day. There are weekly announcements of one hedge fund or another pushing a company to buy back shares, as much for short-term reasons—a large buyer in the market might temporarily push up the price of a stock—as for longer-term ones. ... And then, inevitably, there is tax. Many large companies are quietly following the well-publicised example of Apple by issuing debt to fund dividends or buy-backs rather than repatriating cash held overseas that would trigger large tax payments. Aside from the quirk of holding cash abroad, debt itself offers tax benefits: interest payments are tax-deductible and push down taxable earnings.
Together, the two of us owned more than 18,000 shares of Tejon Ranch, an investment our wives had advised us against. When we’d bought in about a year earlier, the shares had been worth nearly half a million dollars—a significant chunk of our retirement nest eggs. Tejon Ranch had appeared to us to be poorly managed. As professors who write about shareholder activism, we’d thought we’d seen an opportunity to mimic the big activists, such as Bill Ackman and Carl Icahn, who agitate to improve the transparency and performance of much larger companies. ... We had been pressuring Tejon Ranch’s executives, using the playbook that top activists have developed over the past decade or so. But the stock had tanked, we had lost more than $70,000, and we thought Bielli had lied to us.
Founded in 2005, the Brooklyn-based online marketplace hosts 1.8 million small merchants who sell vintage and handmade goods and takes a cut of every transaction. Its sellers traffic in the one-off items usually found in antique stores and boutiques: pineapple-motif throw pillows, succulent-shaped jewelry, tote bags with birds on them. The fast-growing market is often mocked as a kind of twee EBay—TweeBay, if you will. But by early 2015 the company was selling close to $2 billion in merchandise a year and generating revenue of $196 million—figures that had more than doubled from two years earlier. ... Benefit corporations are structured so managers and board members have a legal obligation to worry about more than just their fiduciary duty to shareholders. A public-benefit corporation can get sued for wasting shareholder money just like a normal public company can, but it can also be sued for being a poor steward of the environment or for failing to pay a fair wage.