CNBC’s Scott Wapner is relentless, and that’s what makes him good at what he does. The Judge, as he’s known, is famous for having survived a battle between corporate raiders Carl Icahn and Bill Ackman years ago. [Business Insider] But he’s no match for venture capitalist Chamath Palihapitiya today.
It was only a few short weeks ago that Wapner was schooled by Palihapitiya on his own show about why the biggest corporations, speculators and Wall Street hedge funds “deserved” to get wiped out during the economic crisis. Wapner tried to play the good guy, seemingly defending the actions of stimulus-seeking fat-cat executives during the economic meltdown. But Palihapitiya wasn’t having it then, and he’s not having it now, either.
The CNBC host decided to accept more punishment when he had the Social Capital CEO back on the business network this week. Palihapitiya didn’t disappoint, once again laying out his argument for why companies that have been reckless with their cash aren’t deserving of any rescue funds.
— Richard Burton (@ricburton) April 23, 2020
Apple vs. IBM
The federal government’s bailout of industries like airlines has called into question the cash management behavior of these companies during the good times. While companies have been requesting billions in rescue funds, many have been called out for doling out billions of dollars on share buybacks before the crisis hit in an attempt to prop up share prices. [The Washington Post]
This week, Palihapitiya detailed how in the last 11 years, companies in the S&P 500 used their profits to repurchase “$7 trillion in stock and/or issued dividends,” he told CNBC. That’s the same amount that the government and Fed transferred back to corporate America. Palihapitiya’s issue has to do with these companies being rewarded for their lack of discipline.
Technology isn’t immune either, according to Palihapitiya, who himself is a tech investor. In the latest battle between the venture capitalist and CNBC host, Palihapitiya tore into IBM, saying:
“IBM over the last decade has spent $140 billion on buybacks. This is a company with a $100 billion market cap.”
He goes onto describe how IBM’s revenue dropped for multiple straight quarters and yet the former CEO still earned $100 million in stock-based pay. [CNBC]
Wapner argued that IBM is a “convenient example” for Palihapitiya to choose, pointing out that Apple has been the biggest offender when it comes to share buybacks. But the Social Capital CEO wasn’t having it, instead defending Apple CEO Tim Cook for his ability to keep cash.
In addition to Cook, Palihapitiya cheered Mark Zuckerberg, Warren Buffett and Jeff Bezos for their ability to successfully allocate capital.
“Great CEOs are great allocators of capital. When you do things like buybacks and dividends, what you are essentially saying is you are throwing your hands up in the air and declaring to the world, ‘I do not know what to do with this money.”
He suggests poor allocators should instead direct the capital into rewarding activities such as R&D, M&A and employees.
Palihapitiya has become a hero in cryptocurrency circles, first for being an early investor in Bitcoin (buying when it was priced at $80) and now for going against the tide and calling out reckless behavior while defending the little guy.
Most recently, he’s argued that the cracks in the traditional financial system make the path for Bitcoin that much brighter, if mainstream adoption can take hold. He recently made the case to Forbes about $1 million BTC, saying:
“This is either zero or it’s millions.”