Coronavirus Highlights Lack of Corporate Contingency Plans

The spread of the Coronavirus has placed a spotlight on how public companies spend excess cash and the plan to weather a crisis such as this one.  As recently reported by Bloomberg, S&P 500 companies used over 50% of free cash flow to repurchase company shares with certain industries, like U.S. airlines, spending an astounding 96% over the past decade.  CNN noted that S&P 500 companies spent over $1.5 trillion on share repurchases in 2018 and 2019 alone and that repurchase programs were still being announced “as the coronavirus crisis mounted” in early March.

Now, only three months since the Coronavirus was identified and two months since the first reported case in the United States, many of those companies are asking for government assistance due to the still-to-be determined economic impact from the pandemic.   While it may be true that no one could have predicted the current global crisis, this is not the first economic crisis nor will it be the last, which begs the question, at least in this author’s opinion, with such exorbitant spending on share repurchases, what economic disruption or emergency were these companies planning to weather, or have government bailouts become the contingency plan?