The motivation behind companies' capital games

Capitalism has become a misleading term with companies nowadays having little need for capital. So what is driving the record levels of engagement with such markets?

Last month Apple raised $17 billion in a bond issue. Not because it needs the money; the company currently has reserves of $145 billion, and the eye-watering margins on its products generate cash at a rate that perhaps only a central bank can emulate. Apple is raising money because its money is in the wrong places and it would face tax bills if it repatriated the money to the US. The transaction illustrates a paradox in the modern relationship between business and finance. Companies have never had so little need for capital nor so much engagement with capital markets.

In the 19th century, railroads raised funds from private investors to finance costly infrastructure. Later, large manufacturing corporations raised capital in much the same way.


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