WSJ: Companies Stop Stockpiling Cash
The Wall Street Journal writes "After Stockpiling Cash, Some Companies Are Looking to Spend," which tells us, "Companies have been stockpiling cash to navigate the coronavirus pandemic, and some are getting eager to spend it. Cash holdings of U.S. public companies amounted to $2.54 trillion during the latest reported quarter, up from $1.96 trillion at the end of 2019 and $1.86 trillion from the second quarter in 2019, according to S&P Global Market Intelligence. While it can be reassuring for finance chiefs to have ample cash and liquidity amid the economic downturn, many executives feel they need to put their companies' capital to work, using it to seize growth opportunities and generate returns for shareholders." The Journal article explains, "Microsoft Corp., with $136.5 billion, topped the list of America's cash-rich companies as of June 30, according to S&P. The software company could find use for some of that as it is in advanced talks to purchase the U.S. operations of video app TikTok. Other companies with significant cash and short-term investments include Google parent Alphabet Inc., with $121.1 billion, and car maker Ford Motor Co., with nearly $40 billion in the latest-reported quarter, S&P data show. Most companies have held back from spending on share-buyback programs and dividends since the beginning of the pandemic. Some businesses with strong cash holdings, such as cereal maker Kellogg Co., said they plan to focus on investing in their brands, capital expenditures and repaying debt." The piece adds, "Average cash holdings in the tech sector increased roughly twofold over the decade through 2019 to $9.95 billion, according to Bain & Co., a management consulting firm. By contrast, average cash holdings for the total S&P 500 increased 35% to $3.65 billion over the same period. Still, tech companies aren't making aggressive plays yet in this recession like they did during the credit crisis. 'Executive focus is on Covid-19 and managing through Covid-19,' said Adam Haller, a partner at Bain. 'So finding the executive bandwidth and mind share to focus on acquisitions is a big part of why you're not seeing M&A happen in tech right now.'"
