If you were going to buy a house, before meeting with the buyer you would have gone to the bank to arrange financing or a pre approved mortgage. Then you would discuss with the buyer and their realtor how you were going to pay when the buyer agrees with your price. The same process happens at a much larger scale in business. Typically the company which wants to buy the other company goes to their investment bankers who determine how to finance the deal. Talks happen, the other side agrees and money moves around the table.

In an article by Anirban Sen and Greg Roumeliotis of Reuters, in the case of Twitter Elon Musk can not just walk away because he wants to. Mr. Musk by all accounts is one of the wealthiest people on the planet and he could afford to buy Twitter if he wanted to. However similar to many wealthy people, not all his money is in cash, much of it is in stock and some of that is pledged to his various companies.

Mr. Musk did go to the investment bankers at Morgan Stanley, Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho Financial Group and Societe General and arranged $13 billion in financing.

If Mr. Musk walks away from Twitter, he owes Twitter a billion dollars and Twitter is in court suing for it and the case is in the courts in Delaware Court of Chancery.

The banks have limited options if the court says the deal must go forward, and most of them are not good for the banks. If the court said the deal must go through, the banks would have to finance it but since Twitter does not make profits, they would have to write of bad debt. Another negative is Mr. Musk owns companies which need investment bankers on a regular basis would he stick with them or go to new bankers?

To get out of the deal, Mr. Musk would have to he used his best efforts, according to the terms of the Mr. Musk’s deal with Twitter but the banks refused to deliver. The perils is would the information in the emails and texts show any other information?

Linking to dividend paying stocks, profitable companies grow by mergers, they are part of the normal course of action. Mergers tend to have a normal playbook that has evolved and all parties tend to play by the same playbook. When people or companies deviate from the normal playbook, lawyers and courts are involved to settle the disputes. The settlement process takes time away from regular business activity and as shareholders, you might want to seek alternatives until the dispute is settled.

There are more questions than answers, till the next time – to raising questions.

Every quarter large organizations and governments introduce new products to deal with a problem and the organization believes a solution is offered. However, it will be clear to everyone but the policy makers, the solution was not the best solution because people at all levels can see right through it.

In an article by Jeffrey Moyo and Geofrey York of the Globe and Mail, the government of Zimbabwe has many problems including a collapsing currency and the world’s worst inflation rate. The policy makers introduced a 22 carat gold coin costing $1,800 US.

In the article, the reporters asked ordinary people if they were buying or had seen someone using the coins. The answer was no. The official inflation rate in Zimbabwe was 257% in July, according to Steve Hanke, a US economist the real rate was 595% a year.

The gold coins are bought by wealthy investors and speculators because the coins can by bought in Zimdollars at the official exchange rate, far below the street rate. Traders change their US dollars into Zimdollars on the street market (the unofficial rate is 800 to one US dollar, up from 400 to one), use the Zimdollars to buy gold coins and then sold the coins to banks for US dollars for easy guaranteed profits. What was the solution the government was trying to solve?

Linking to dividend paying stocks, there are a great many good ideas that come everyday, there are also ideas that do not work but make it through the process. The reality is everyday people will determine if an idea is good, speculators will see if the idea can be exploited and unless someone has decided which one is more important, the customer will decide whether the idea is good or should be discarded. Ideas come through the decision making process for many reasons, hopefully with your investments, there are more genuinely good ideas.

There are more questions than answers, till the next time – to raising questions.

In every market there is many types of investors and to have a functioning market there needs to be a variety of different players. Some investors are buy and hold (buy a profitable company and hold it for years – allow dividends to increase your total return), some are looking for value, some are momentum players (what stock is moving upwards and catch a ride), and the combinations are endless. What works for you is whatever you decide.

In an article by Bansari Mayur Kamdar and Medha Singh of Reuters, there has been a stock which has risen 21,000% since its IPO of $7.80. The stock is in the thousand dollar range, but be careful because it had dropped 40% in one day. The stock has since fallen to $201 a share and will likely go lower because the hype is gone.

AMTD Digital has been the stock of choice on Reddit.com, the social media platform central to the meme stock craze of 2021 or GameStock and AMC. AMTD Digital is a fintech firm based in Hong Kong and provides loans and services for fees. The company said it had no material change or event related to the company’s activities.

Linking to dividend paying stocks, owning a stock with a 21,000% return is winning the lottery if you sell, some or all of your shares and not reinvest. Consider someone who sold something, then bought and lost 40% of the value, it takes a great deal to achieve a 40% gain, if the stock does not have the abilities of a mega capital stock such as Google or Apple. (those companies went down by now they are back up) with a AMTD Digital ever go back up? The market is made up of many players all trying to make money or increase their wealth, if you are a dividend player you consider the long term and total return on your money. There are many movies where the character bets it all and loses only to walk away what they originally had.

There are more questions than answers, till the next time – to raising questions.

The development of drones has made the world and business a smaller world because news organizations, governments and rival companies have a view of what is going on or what issues management is dealing with and how they are dealing with the issues.

In an article by Niall McGee of the Globe and Mail, a company called Lundin Mining Corporation is mining copper in the Chile. The mountains of Chile have some of the biggest mines and all the major mining companies are actively looking and finding minerals in the Andes Mountains. After locating potential deposits, it takes millions of dollars to extract the ore from the ground, but there are even more millions to be made if the deposit is of commercial quality.

In Alcaparrosa, Chile, Lundin Mining with a 80% share and Sumitomo Metal Mining Co of Japan has 20%, they mine copper, gold and silver. The annual production is about 160,000 tonnes of copper.

Chile’s geology and mining regulator, Sernageomin, posted a picture of the large sinkhole on Twitter, and a new challenge of analyzing why the sinkhole appeared. Lundin said the sinkhole has no impact on staff, equipment, or mine infrastructure. The mine where the sinkhole opened up accounts for 5% of the production of the Candelaria’s output.

Sinkholes form when the land underground can not support the weight coming from the surface and collapses. This could be a natural normal occurrence or caused by industrial activity.

Lundin purchased the mine site from Freeport-McMoRan for $1.8 billion in 2014.

Linking to dividend paying stocks, things happen and many happen because it is nothing normal, what is the new normal is everyone knows about the issue sooner and longer. The issue is how does management to tell its shareholders? Shareholders do not mind bad news, but if the company is not forthcoming, it is easy to seek new alternatives on the stock market.

There are more questions than answers, till the next time – to raising questions.

In every company, they try their best to provide goods and services and the over whelming majority try to do it within the law or what is legal. We depend on people making decisions which abiding by the law is the better way to do business. Understanding the margins are much higher in the illegal ways, but then life expectancy is much lower.

In an article by Ephrat Livni and Laren Hirsch of the New York Times News Service, credit card companies including VISA and Mastercard dominate the credit card industry, in 2004 they held 75% of all debit purchase volume and in 2021 it rose to over 80%.

At one time the owners of the credit cards were the banks which issued the cards, since 2006 and 2008 when VISA and Mastercard went public the ownership structure changed.

For VISA and Mastercard, the legal department is large and there are many lawsuits filed against them every year. One such lawsuit against VISA is they are the credit card for MindGeek’s website Pornhub. Watch porn on line and pay with VISA. Pornhub has underaged females on their site and one of them has filed a lawsuit against VISA. A US federal judge refused VISA’s request to be dismissed from a case it conspired with MindGeek to profit from images of child sexual abuse.

The judge said, if VISA was aware that there was a substantial amount of child porn on MindGeek’s site, then it was aware that in processing the monetization of child porn, moving money from advertisers to MindGeek for advertisers playing along side child porn similar to the plantiff’s videos.

VISA said we provide a service and we would have to police billions of transactions, we co-operative with law enforcement but the onus should not be us.

In another case, Walt Disney filed an antitrust lawsuit against VISA and Mastercard saying the fees are too high or they are being overcharged on the merchants’ fee. Nobody knows if fees were lower, would prices be lower? but Disney (and many others) believe fees are too high.

Linking to dividend paying stocks, credit card companies have high margins (above 40%) and have long paid dividends to shareholders. All companies want to do what is legal, but how does any company ensure that everyone uses their products and services to be legal. People do all sorts of things, where does corporate responsibility stop?

There are more questions than answers, till the next time – to raising questions.

Everyday on the stock exchange there are mergers and acquisitions announced, some will be very good, some with be average and soon will not work out. The results of the merger and acquisitions can only be seen in retrospective or well after the process goes through. Many of the mergers will be add ons to the company, but some are mergers between giants in the industry. Although there are giants in the industry, change is happening to the normal practice of the industry and companies are trying to deal with the what worked in the past. Will it work in the future? maybe or maybe not. Government tend to look at the way the industry was in the past, not necessarily the threats in the future.

In an article by Marcy Gordon and Hillel Italie of the Associated Press, in the world of book publishing two giants are trying to merge – Penguin Random House and Simon & Schuster. The cost of merger is $2.2 billion. In large mergers, the Competition Bureau through the Justice Department has to sign off, the are objecting and the trial begins in August and likely last until October.

The government contends that the merger would hurt authors and ultimately readers. The publishers counter that the merger would strengthen competition among publishers to find and sell the hottest books, by enabling the combined company to offer bigger advance payments and marketing support to authors. It would benefit readers, booksellers and authors.

The Big 5 – Penguin, Simon & Schuster, Hachette, HarperCollins and Macmillan – dominate 90% of the market for anticipated top selling books.

Under former President Trump, the competition bureau allowed more mergers and acquisitions.

Linking to dividend paying stocks, governments change and sometimes the policies change at greater than the margin. One of the keys is how does governments look at mergers and acquisitions? Is it good because all governments tend to want growth; it is bad because people will be let go on cost savings; what do the political leaders think about the balance? When governments change, how well does the government relations department relate to the existing government.

There are more questions than answers, till the next time – to raising questions.

When a company is successful and that is the goal, at some level it is supported and sometimes does the work of the government in the country it is located in. If you look back into the history book’s company’s such as the East India Company had the support of the British Navy it is dealings with China (the East India company evolved from trading India raw materials with British manufactured goods to importing opium into China for Chinese silver). In more recent times the United Fruit Company which was headquartered in Boston through the US government agencies changed governments in the tropics to ensure its bananas were grown and transported to the US. There are many more examples, when a company sells outside its borders it works with the Embassies are the world to help sell goods and services. In recent times, the examples are Chinese companies doing the work of the Chinese government.

In an article by James Griffiths of the Globe and Mail, in 2018 a group of engineers at Tencent, one of China’s largest technology companies, started crunching data to see if they could predict which Communist officials would make it to the all powerful Politburo standing committee. In the western world, many companies do something similar, in China officials were not amused and Tencent was ordered to suspend rolling out apps and updates and the founder of the company disappeared from public view for a year

There is a new book about Chinese technology companies by Lulu Chen titled Influence Empire: The Story of Tencent and China’s Tech Ambition.

The above was a rare misstep for Tencent which has the most popular app in China WeChat. It is the most popular app because besides the messaging aspect, people can book taxis, order food in restaurants, pay bills, apply for loans and Chinese government regulations.

Tencent has been able to weather the storm of tech company crackdown by the Chinese government because the Chinese government sees how WeChat is valuable and the President of Tencent keep a low profile.

The government saw how important WeChat was to the average citizen, and found a level of insight into people’s lives that could be monitored and they do. Practically, the Chinese government has outsourced and privatized a lot of the work of building and running the monitoring of its people.

The author Ms.Chen believes private companies have always innovated better because they are practicing capitalism models and placing their capital with greater efficiency.

WeChat has benefited from scale and the government has encouraged Tencent to consolidated with many companies. However not everything is good from Tencent’s point of view. The company used to have a profitable gaming site but gambling has been heavily regulated which decreased revenues.

Linking to dividend paying stocks, every successful company deals with government officials sometimes even though they are only interested in selling goods and services, will do what the government wishes them to do. Generally the relationship is a good one, but policies at governments change and relationships are maintained. All companies are bias one way or another, although for shareholders there is a bias towards being profitable and paying dividends.

There are more questions than answers, till the next time – to raising questions.

For generations, every since the John Rockefeller founded Standard Oil, an investment in the oil company has generated consistent profits. The oil companies supply the oil and gas needed to drive vehicles and electricity to power plants for people to live in urban environments. There has been many good things which came out of the oil and gas companies.

In an article by Ron Bousso and Shadia Nasralla of Reuters, one of the 7 sisters of the oil business has been Shell Oil and it made $11.5 billion in profits. The record results topped the previous quarter. The company decided to use $6 billion to buy back shares (reduce the number in circulation) but did not increase its dividend. Last year, the company bought back $8.5 billion in shares. The company noted shareholder returns would be in excess of 30% of cash flow from operating activities.

In 2021, the company made $5.5 billion, in the first quarter of 2022 it was $9.1 billion and the second quarter it was up again to $11.5 billion, above analysts’ expectations of $11 billion.

Shell’s strong results reflected higher energy prices, higher refinery margins and strong gas and power trading.

Shell has debt of $46.4 billion, down from $48.5 billion 3 months ago. Shell’s debt to capitalization ration is 19.3%.

Linking to dividend paying stocks, it is hard not to own oil and gas stocks in a dividend portfolio because the companies have a history of making large profits. In the case of Shell profit was $5 billion and more than doubled to $11.5 billion, owning a stock with that type of earnings means you can hold on to for a long time. Over the years the combination of buybacks and dividends will increase your total return and that is a good thing.

There are more questions than answers, till the next time – to raising questions.