BBC: eBay to repatriate $9bn in cash to US

[richardmsstuff]

Link to a very interesting article.

[hicburp]

My question is:

What do ebay know that we don't ???

[goldcarp]

Looks like this is just a measure to increase liquidity for ebay in the US to fund acquisitions, but could be to do with US pressure on major US companies to stop avoiding US tax. Hopefully this should not have a negative impact on ebay in Europe.

[borismcdoris]

pulling nine thousand million USD out of ireland is bound to have some effect is it no?

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[richardmsstuff]

Interesting isn't it? I thought the reported net loss of $2.3bn would attract more comment.

I'm guessing that this is a bit of a reactive move in response to some sort of pressure since taking the loss is a bit of a tough call. The linked announcement made by ebay doesn't really elucidate as far as I can see.

[richardmsstuff]

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@borismcdoris wrote:

pulling nine thousand million USD out of ireland is bound to have some effect is it no?

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There's no indication that that amount was on deposit at an Irish bank. Most likely it isn't but will have been spread around various institutions with the goal of optimising interest earnings.

[hicburp]

Yep.... and I trust ebay to tell the truth about as much as I trust politicians.

And I trust politicians about as far as I can kick them.

[kawaza2003]

could do with this info on Twitter and Facebook

[kawaza2003]

can someone put this info onto facebook and twitter - just to make sure people are aware

[kawaza2003]

think the negative impact is already here

[hicburp]

Strange that this topic - which is very important to buyers and sellers -  

has been moved to a part of the forum that is very seldom visitied by either ???

[aernethril]

Not really Hic - it's nothing to do with Selling on eBay, and I doubt many buyers would care either way, but rather is more a politico-business issue which really should be on the RT.

The RT is posted on and read by sellers and buyers alike. I'd be more concerned if it had gone to the FHG board.

In times gone by, this would have been whooshed out of sight completely, so it's good that the discussion can still keep going.

[electric*mayhem*band]

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@aernethril wrote:

The RT is posted on and read by sellers and buyers alike. I'd be more concerned if it had gone to the FHG board.

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[richardmsstuff]

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@kawaza2003 wrote:

can someone put this info onto facebook and twitter - just to make sure people are aware

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Feel free to do it yourself if you think it's tht important.

[goldcarp]

I think this is very important news in terms of it shows the pressure major US corporations are now under from the US administration to relocate capital to the US so it can be taxed, rather than escaping US taxation in EU tax havens like Ireland, the UK or the Netherlands. It demonstrates the increasing desperation of all governments to squeeze as much tax as possible out of everyone, everything, every company so that they can fund social services, pensions and health care to keep the mob appeased that votes for them.

It may have an impact on ebay in Europe but i suspect we are not going to feel much of it.

[richardmsstuff]

It is possible that the repatriation of funds was a result of US govt. pressure, but it's not the only explanation.

Other possibilities that occur to me are: (1) The published explanation is actually true and a strategic programme of acquisitions is being pursued. (2) Pressure on the board from major shareholders to put some of the large cash reserves to work instead of leaving it all scattered around the world in foreign bank accounts.

I think No. 2 is the most likely. Shareholders expect a return on their investment in the company, especially when they are long-term shareholders, and just keeping cash on deposit is not the best option from a shareholder point of view. Capital needs to be put to work to generate a return.

Whatever the motivation the pressure must have been quite intense for the board to accept a $2.3bn loss on the quarter. There must have been some difficult meetings leading up to that event.

[goldcarp]

If ebay really wanted to fund acquisitions why oh why on earth would they repatriate so much cash in one go that they end up with a tax bill that means that their financials show a USD 2.3 billion loss (!) even though revenues are up? Why take that much of a tax hit? It makes no sense, unless ebay was pressurised by the US administration to reduce its attempts to evade US tax. If it was really about funding acquisitions why didn't ebay do a bond issue like Apple?

This theory of US concern about tax is in line with FATCA the recent US legislation designed to increase tax revenue with corporates and funds, Obamas' previous stance on tax havens etc.

As for your second option, again, why would shareholders want the company to incur a massive tax bill by repatriating a gigantic chunk of cash to the US? It makes no sense. It's like throwing money down the drain. Which shareholder ever wanted its company to incur such a gigantic tax bill?

[richardmsstuff]

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@goldcarp wrote:

If ebay really wanted to fund acquisitions why oh why on earth would they repatriate so much cash in one go that they end up with a tax bill that means that their financials show a USD 2.3 billion loss (!) even though revenues are up?

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The short answer is that I don't know... not being privy to any of the internal discussions that led to the decision.

Using the same "why take a $2.3bn loss?" argument, I'd suggest to you that the government attempting to force the company into incurring a $3bn tax liability would have been fought hard in the courts before capitulation. This does appear to have been voluntary. It's all very intriguing.

By the way, if I understand FATCA correctly it applies to individuals, not corporations. I wonder if it was a coincidence that it's just one letter different from "fatcat"?

[goldcarp]

I don't think it works in this way necessarily, that big corporations go to court in these scenarios. When the US finance department applied all the pressure to Swiss banks because of supposed Nazi gold it was the pressure at high level which resulted in the Swiss caving in. Due to the reputations and the fact that the US government can impose legislation it would be unwise to go to court. Even if you win government can pass a new law and you still lose.

I can't imagine any company would take a tax bill of this insane size voluntarily, there must have been some good reasons.

In the US legislation 'persons' is defined so as to include corporates in most cases, FATCA applies to account holders, whether individual or corporate, even to investment funds. They named it that way on purpose for giggles.

[borismcdoris]

when one falls into an icy river the blood in your body goes into the centre of your body to protect the vital organs. this can be at the expense of your limbs. this situation is (probably) similar.

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