Doomscroll News

Tag: Investing

  • How to Spot a Zombie Company

    Forget the daily stock market noise. The real story is in the rot that hollows out a company from the inside, long before the public ever knows. Today, we’re talking about the mechanics of corporate failure. We’ll explore how titans like Starbucks and Lowe’s can operate with negative shareholder equity, why the most respected corporate laws in Delaware might actually encourage risky behavior, and how a 6,000-to-1 pay gap is more than just a headline—it’s a symptom of a system on the verge of collapse.

    Doomscroll Dispatch
    Doomscroll Dispatch
    How to Spot a Zombie Company
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  • Five Hidden Red Flags That Signal a Corporate Collapse

    The landscape of American commerce is littered with the ghosts of giants that once seemed invincible. Names like Circuit City evoke a recent memory of sprawling stores that went from market leaders to liquidation sales with startling speed. While it’s easy to see the collapse in hindsight, the more pressing question is whether the warning signs were visible all along.

    The answer is often a resounding yes, but the most potent signals of deep corporate trouble are rarely found in splashy headlines. Instead, they are hidden in a modern playbook for corporate decay: one that prioritizes aggressive financial engineering over operational health, enabled by respected legal structures and rewarded by profoundly misaligned executive incentives. This article uncovers five of these overlooked red flags—buried in SEC filings, academic research, and strategic blunders—that can signal a company is on a dangerously unsustainable path.

    1. When a Company’s Value Dips Below Zero

    One of the most alarming yet surprisingly common signals is Negative Shareholders’ Equity (NSE). In simple terms, this occurs when a company’s total liabilities—everything it owes—exceed its total assets, or everything it owns. It is a classic sign of severe financial distress, indicating that if the company liquidated all its assets to pay its debts, shareholders would be left with nothing.

    While one might assume this condition is reserved for obscure, failing businesses, a surprising number of household names operate with negative shareholder equity. Recent financial analyses reveal this list includes retailers like Lowe’s, coffee behemoth Starbucks, tech giant HP Inc., and personal care brand Bath & Body Works. This trend is particularly acute in certain industries. The “Home Improvement Retail” sector, for instance, which includes giants like Lowe’s, carries a staggering average Debt-to-Equity ratio of 44.17, showcasing an industry-wide addiction to the kind of debt-fueled share buybacks that hollow out a company’s financial foundation.

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  • The “Good” Buyback vs. the “Bad” Buyback

    Imagine a successful company like Apple. It generates enormous amounts of free cash flow, far more than it needs to run its business and invest in future growth. It uses this excess profit to buy back its own shares. This reduces the number of shares outstanding, which increases Earnings Per Share (EPS) and the ownership stake of the remaining shareholders. In this scenario, shareholder equity remains robust and positive because it is constantly being replenished by massive retained earnings.

    Now, consider a company with stagnant growth, inconsistent profits, or a struggling business model. To make its financial ratios look better and to prop up its stock price, the management might decide to buy back shares. But where does the money come from if not from excess profits? It often comes from taking on new debt or draining cash reserves that are needed for operations and innovation.

    This is the “bad” buyback. The company isn’t creating new value; it’s using leverage to manipulate its financial appearance. On the balance sheet (Assets = Liabilities + Equity), liabilities (debt) go up, and assets (cash) go down to pay for the shares. This combination aggressively eats away at the equity portion of the equation. When a company buys back so many shares that the cost exceeds its retained earnings and initial capital, shareholder equity flips to negative. It means the company’s liabilities now exceed its assets, a state of technical insolvency.

    Even more concerning, is when a company does both buybacks and dilutions (selling new shares). This is a major red flag. It’s like a frantic attempt to tread water: they sell new shares to raise needed cash (diluting your ownership), and then use cash (often borrowed) to buy back other shares to support the stock price. This financial churn suggests a lack of a coherent long-term strategy, prioritizing short-term stock performance over fundamental business health.

  • The Unholy Alliance: Are Goldman Sachs and Apple Secretly Stockpiling Gold?

    Disclaimer: The following is a speculative theory presented for discussion only. It is not based on factual research and is not intended to be a statement of fact.

    Here’s a thought: What if Goldman Sachs’s recent bold prediction of $5,000 gold is a strategic move? They have a massive financial partnership with Apple through high-yield savings accounts. At the same time, Apple’s need for physical gold for its semiconductors is ever-increasing.

    Could Goldman be creating a public narrative to sell the idea of gold to everyday investors, while in the background, they work with Apple in a kind of “unholy alliance” to use their financial machinery to build a massive, stealth stockpile of physical gold? This would secure Apple’s future supply chain for a critical mineral, potentially leaving the average investor holding the bag. It’s a sneaking suspicion that this could be a form of financial engineering hiding in plain sight.

  • Just for Fun: Urgent Recommendation to the Securities & Exchange Commission (SEC): Enhanced Specificity for Use of Proceeds Disclosures

    MEMORANDUM

    FOR: The Honorable Chair, U.S. Securities and Exchange Commission

    Director, Division of Corporation Finance

    Director, Division of Enforcement

    FROM: [redacted]

    DATE: April 4, 2025

    SUBJECT: Urgent Recommendation: Enhanced Specificity for Use of Proceeds Disclosures

    1. Purpose: This memorandum recommends immediate action (rulemaking or interpretive guidance) to prohibit public companies from using vague terms like “other general corporate purposes” as the primary descriptor for the intended use of capital raised via registered direct offerings, private placements, or shelf registrations.

    2. Problem Statement & Background: Current Regulation S-K allows non-specific “general corporate purposes” disclosures. This flexibility is being exploited, contributing to significant retail investor harm. We’ve observed a troubling pattern, particularly acute during the Biden administration, where companies, especially in FDA-regulated sectors like biotech (e.g., Lucira Health, Cue Health) and other industries (e.g., Applied UV, Virgin Orbit, Rockley Photonics, Pacific Coast Oil Trust), raise substantial funds citing vague purposes shortly before collapsing into bankruptcy. This frequently results in devastating losses for individual investors (often $50,000+), while employees lose jobs.

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