The best fate for US aviation giant Boeing would be to "die", investment advisor David Baskin told BNN Bloomberg on Monday.
The president of Baskin Wealth Management said that the planemaker had "negative shareholder equity" on its balance sheets, despite being America's "most profitable companies" worldwide in the Boeing-Airbus duopoly.
He added: “The reason is they spent $42 billion buying back its own stock and basically used up its entire retained earnings buying back its stock, depleting its balance sheet and making it extraordinarily vulnerable to an event like this."
Speaking on the planemaker's $60bn bailout request to the Trump administration earlier in March, Mr Baskin said that such measures would set a bad example for corporate governance practices.
— Peter Schiff (@PeterSchiff) March 17, 2020
“Add on the travesty of 737 Max, which I view as a massive failure of corporate compliance and corporate culture — they knew that these planes were dangerous, they actively conceal that evidence from the Federal Aviation Administration, and my view would be not a penny to bailout Boeing," he said.
Boeing should "go bankrupt" and new management should assume duties, in addition to wiping out stakeholders "who benefitted from these shareholder payments, these buyouts of shares which imperilled the company", Mr Basking said.
He slammed any potential bailout of Boeing as "horrible corporate governance", adding that businesses ran the risk of "encouraging that action in others, a moral hazard".
He concluded that should the Republican-dominated US Congress approve such measures, stocks could rise. "I hope it doesn't", he said.
— Kris McCusker (@Kris680NEWS) March 23, 2020
The news comes after Goldman Sachs told CNBC: "We think Boeing will remain a going concern...travel by flight will be as popular as ever once COVID-19 is resolved. We therefore think shares of [Boeing] should be procured at the current price that is down 70% YTD, 80% from 2019 [highs.]"
According to reports, the American aviation giant could face losses up to $18.7bn over the aftermath connected to two plane crashes in Indonesia and Ethiopia in October and March, respectively, killing 346 people, due to engineering abnormalities and the plane model's Manoeuvring Characteristics Augmentation System (MCAS) suspected of causing the crashes.
Boeing estimated its losses would consist of $8.2bn in compensation to airline customers and a further $6.3bn in increasing costs to build the 737 MAX.
The announcement came as shareholders held an annual meeting amid the COVID-19 and 737 MAX crises, where its Puget Sound facilities in Washington state have been forced to close temporarily due to the pandemic. The measures were "necessary steps" to protect employees and communities, company president and CEO Dave Calhoun said in a statement.