In my last post, I looked at the negative effects on equity value of the threat of government expropriation (nationalization). In this one, I want to focus on the more benign (and perhaps positive) impact that governments can have the values of some companies, through subsidies in one of many forms: providing or facilitating below-market rate financing, special tax benefits, revenues or price supports and even forcing competitors to provide direct benefits to a subsidized entity. Note that my intent in this post is not to examine the wisdom of these subsidies and whether governments should be tilting the playing field. While I do have strong views on the topic (and you can guess what they are from the subtext), I want to focus on the mechanics of how best to value businesses that benefit from these subsidies. This post was, in part, triggered by the
Governments and Value II: Subsidies and Value
Governments and Value II: Subsidies and Value
Governments and Value II: Subsidies and Value
In my last post, I looked at the negative effects on equity value of the threat of government expropriation (nationalization). In this one, I want to focus on the more benign (and perhaps positive) impact that governments can have the values of some companies, through subsidies in one of many forms: providing or facilitating below-market rate financing, special tax benefits, revenues or price supports and even forcing competitors to provide direct benefits to a subsidized entity. Note that my intent in this post is not to examine the wisdom of these subsidies and whether governments should be tilting the playing field. While I do have strong views on the topic (and you can guess what they are from the subtext), I want to focus on the mechanics of how best to value businesses that benefit from these subsidies. This post was, in part, triggered by the