Dallas Mavericks owner and investor Mark Cuban has taken to Twitter this morning with some big thoughts about the U.S. companies changing to foreign addresses to get tax breaks.
Such corporate relocations, known as inversions, have become a hot-button issue in recent days after several major corporations pulled the tax maneuver and President Obama began calling for Congress to block this virtual corporate exodus.
Cuban starts with what sounds like your basic economic patriotism argument:
If I own stock in your company and you move offshore for tax reasons I'm selling your stock. There are enough investment choices here- Mark Cuban (@mcuban) July 25, 2014
And then things get more interesting.
If you talk to me as a shareholder and ask me to accept a higher PE so you can save jobs I'm open to it. The risk doesn't leave the system- Mark Cuban (@mcuban) July 25, 2014
By PE, Cuban means price-earnings ratio, the standard way investors value a stock. He means that if companies take the tax break, investors ultimately benefit because it raises earnings. (We recently discussed who really benefits here. Short answer: That's true mostly for wealthy investors like Cuban.) And he says he's wiling to live with lower earnings. But what does "risk doesn't leave the system" mean?
When companies move off shore to save on taxes, you and I make up the tax shortfall elsewhere sell those stocks and they won't move- Mark Cuban (@mcuban) July 25, 2014
Of course, he adds, if you sell to punish a company for cutting its taxes, make sure it doesn't mean you pay a bunch of taxes.
2) make sure to check the tax consequences of selling before you make a decision- Mark Cuban (@mcuban) July 25, 2014
Activism has its limits, amirite?