Publicly Traded Companies Used PPP Money for Stock Buybacks and Dividends

Some publicly traded companies used PPP money for stock buybacks and dividends.

According to a review of 2020 and 2021 financial filings, these companies included tech giant Apple, which repurchased $50 billion worth of its own stock during that time period.

Many of these companies continued to do so even after the PPP loans were forgiven.

In fact, Apple repurchased an additional $60 billion worth of its own stock in 2022, just one year after the PPP loans were forgiven.

Dividends and buybacks are already under pressure. Dividends paid globally dropped to US$1.05 trillion in June on an annualized basis, a 12% decline from their peak in February.

Many companies are reconsidering their buyback programs. In the US, S&P 500 companies that contributed to 27% of share repurchases in 2019 have already suspended buyback programs.

Companies that take PPP loans may face restrictions on dividends and buybacks. Under the CARES Act, US companies that take PPP loans may not pay dividends or buy back shares in the next 12 months or until there are no outstanding loan guarantees.

The European Central Bank has also taken action. The ECB has ordered EU banks to halt dividend payments and buybacks at least until October 2020.

Despite these restrictions, some companies are still paying dividends. In the second quarter of 2020, US companies slashed $42.5 billion in dividends, the biggest cuts since the first quarter of 2009.

Dividends paid globally dropped to $1.05 trillion in June on an annualized basis, a 12% decline from their peak in February.

Companies are slashing their dividend payments, with $42.5 billion cut in the US during the second quarter of 2020, the biggest cuts since the first quarter of 2009.

S&P 500 companies that contributed to 27% of share repurchases in 2019 have already suspended buyback programs.

Share repurchases are expected to drop by more than 50% in the second half, after the Fed issued guidance for large banks to halt buybacks.

Companies that take PPP loans may not pay dividends or buy back shares in the next 12 months or until there are no outstanding loan guarantees, as per the CARES Act.

EU banks have been ordered to halt dividend payments and buybacks at least until October 2020 by the European Central Bank.

The Bank of England asked large UK lenders to suspend dividends and cash bonuses for senior executives, prioritizing other stakeholders' interests over those of shareholders and management.

A New Analysis from Accountable.US reveals that many companies that received PPP loans went on to engage in stock buybacks.

According to their research, 92 Fortune 500 companies received PPP loans totaling $10.4 billion, but then spent $43.4 billion on stock buybacks in the following year.

The same companies that received PPP loans also reported a combined $1.4 trillion in profits over the past three years.

Accountable.US found that 64% of the largest PPP recipients received more than $10 million in loans.

These companies were able to use the PPP loans to boost their stock prices, which in turn allowed them to continue funding their stock buyback programs.

The largest PPP recipient, Wells Fargo, received $4.2 billion in loans and then spent $3.3 billion on stock buybacks in the following year.

Here's the "Key Points" section:

The PPP loan program allows businesses to use loan funds for stock buybacks, but there are specific rules to follow.

The SBA's guidance allows for stock buybacks, but only if the business can demonstrate that the buyback is a legitimate business purpose.

Businesses must use at least 60% of the loan proceeds for payroll costs to be eligible for forgiveness.

The remaining 40% of the loan can be used for other business expenses, including stock buybacks.

The IRS has deemed stock buybacks to be a legitimate business expense, but only if they are done in a way that benefits the business.