Bufetico
Boeing’s shareholders’ equity was $5,454 million at the end of December. Six months later it was $6,100 million.
In between, the company lost $448 million.
It didn’t issue a single new common share to do it. The share count in the filing is the same at both ends.
Two explanations that don’t fit
Two explanations come to mind, and both are wrong here. Either things got better, or the company raised money.
Things didn’t get better: the loss is right there in the same document, and the second quarter was worse than the first.
And the company didn’t raise money. Common stock and preferred stock both sit unchanged, at $5,061 million and $6 million, so no new money came in.
So $646 million of equity came from somewhere that’s neither profit nor new money, and that somewhere is worth knowing about, because it’s pretty much where most of these movements come from.
Where it came from
The statement of equity lists it plainly. The biggest line isn’t close: $855 million of the company’s own shares, handed to employees instead of cash for their retirement plan.
After that comes $264 million of share-based compensation, which is the same idea in a different suit: people paid partly in stock instead of money. Another $145 million is accounting adjustments on pensions and hedges, which moved because interest rates and currencies moved. And $172 million went out, for the dividend on the preferred stock.
Add them to the loss and you land within a rounding error of the $646 million.
Not one of those lines is about selling airplanes.
Why I care about this line
A lot of people judge how indebted a company is by comparing what it owes to what it owns, and what it owns is this number.
The other day I wrote about Etsy (/blog/negative-equity-breaks-debt-ratio), whose equity is roughly negative $1.1 billion because it has spent years buying back its own stock. Money left, equity fell below zero, and the business was never the reason.
Boeing is the same line moving the other way, for reasons just as unrelated: it paid people in shares instead of cash, so equity went up while the company lost money.
One went negative while healthy. One went up while losing. If a ratio built on that number is what tells you how safe a company is, you’ve handed your judgment to a line that does what it likes.
Where this breaks
These movements are not noise, and treating them as noise is its own mistake.
Paying a retirement plan in shares instead of cash is a real decision with real consequences. It keeps $855 million of cash inside a company that needs cash, and it hands a slightly smaller slice of the business to everyone who already owned one. Both of those matter. Somebody who held Boeing in December owns a little less of it now, and no announcement was made.
So the equity line does tell you something. It records what has been put in and taken out over the company’s whole life, adjusted by accounting rules that move on their own. How safe the company is today isn’t in there.
For the last six months, the plainest thing I know is still the cash the operations produced, and whether the debt can be paid out of it. That’s a much harder number to move with a board decision.