The news has been broken that BP is going to proceed with plans to pay out $10B/year ($2.5B/quarter) in dividends to shareholders.
This naturally leads to questions.
Such as: $10B would pay for a lot of cleanup in the Gulf, wouldn't it?
And: Who gets this money?
The answer to that second question is available here.
Here is a linkto BP's regulatory filings in the UK.
Follow me below the fold for discussion.
First of all, BP has the money. They have $8B cash on hand, and another $8B in short term investments. They will notice paying out $10B, but it won't leave them short of funds to work on Deepwater Horizon.
Secondly, BP is not going to be bankrupted by Deepwater Horizon unless some very serious criminal charges emerge. They have a net worth of $71B (same link). The estimates of the fines for the leaked oil are in the $3B range.
They generate cash flow from operations of $38B per year.
So this is not money going to affect cleanup, and it's not money that we're going to be trying to track down after BP declares bankruptcy.
Having said that, who gets the money?
Not the executives. They own a relatively minor share of the company.
These are the major holders.
Now, BP has a market capitalization, today, of about $120B. That means that if every holder could be persuaded to sell at today's price, you'd need about $120B to buy every share of BP.
Therefore, owning 10% of BP is worth about $12B, 1% is worth about $1.2B, and .1% is worth about $120M, at today's prices.
From the link, these are the major holders (italicsindicate a mutual fund):
Holder | % Shares |
---|
WELLINGTON MANAGEMENT COMPANY, LLP | 1.11 |
BARROW, HANLEY MEWHINNEY & STRAUSS, INC. | .53 |
BANK OF AMERICA CORPORATION | .44 |
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO | .42 |
PRICE (T.ROWE) ASSOCIATES INC | .40 |
MORGAN STANLEY | .36 |
VANGUARD/WINDSOR II | .31 |
VANGUARD SPECIALIZED-ENERGY FUND | .25 |
FMR LLC | .25 |
WELLS FARGO & COMPANY | .25 |
Tradewinds Global Investors, LLC | .24 |
VANGUARD/WELLINGTON FUND INC. | .23 |
GATES (BILL & MELINDA) FOUNDATION | .23 |
FIDELITY DIVERSIFIED INTERNATIONAL FUND | .21 |
And that's everyone who owns at least two-tenths of one percent of British Petroleum.
Some hedge funds, surprising no one.
A whole lot of the usual suspects: B of A, MS, Wells Fargo. Goldman Sachs managed to keep their fingerprints off this one.
And a few 401(k) funds managed by Vanguard and Fidelity and T. Rowe Price.
And one of the largest charitable foundations in the world, one that actually does real good work.
So what does this mean? I guess to me it means that BP, by screwing up, should hurt their investors. And some of those investors may not be bad people - but that's how capitalism works.
And I hope the Gates divest BP and put their money some place more social responsible.
BTW, if you own 0.1% of BP common stock, your share of $2.5B is $2.5M. So the Gates Foundation gets a check for about $6M.
Update:
It is worth considering that e.g., Exxon Mobile, could probably afford to launch a hostile takeover of BP if their stock price were to fall much further. That may be worrying BP