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:
And then things get more interesting.
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?
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.
Activism has its limits, amirite?