sfbm and all -- There are so many problems with the US taking a 10% stake in Intel that it's hard to know which terms of the deal are the worst, or are they all equally bad? From the info I've seen, there is no restriction on voting. The shares to be acquired are the currently traded common stock shares, which allow one shareholder vote for each share. Stipulating that the government won't be eligible for any BoD seats does not restrict government influence on the BoD and management, simply because the government will become Intel's largest single shareholder (and voter).
If the government wanted to help Intel without directing and financing Intel's future business, and without conflicts of interest in the products or equipment the government decides it wants to buy (from intel or its competitors), then the administration could have, and should have taken at least the following steps:
1. Intel should register a special issue of non-voting shares, along with preferred stock convertible into non-voting common shares, and callable no earlier than February 2028 (presumably by a new administration).
2. Intel could also issue bonds at a rate of at least 6%, or convertible into non-voting common shares, and callable no earlier than February 2028. Intel would get a tax deduction on the interest paid on the bonds, but the after-tax cost of the interest would be nearly the same as the government borrowing cost.
3. During the period in which the government holds intel securities, whether stock or bonds, it should agree in writing not to purchase any goods or services valued at greater than $10,000 without a formal public bidding process, to avoid even a trace of conflict of interest.
Taking these three steps would also enable Intel's BoD to avoid charges of breech of fiduciary duty to its non-US government shareholders.
If one examines Berkshire Hathaway acquisitions in past years, even ones that didn't work out well (U.S. Airways, for example) involved creation of new shares, usually convertible preferred, to give Berkshire and its leader Warren Buffett greater protection than would be available to anyone else buying only existing shares of common stock.
What troubles me in particular is that the Secretary of the Treasury purportedly has the knowledge and expertise of corporate financing and should have known better than to accept the wishes of someone who had earlier gained a reputation of a convicted felon, along with six bankruptcies in his own businesses.
Art |
