Sometimes, you just have to love how the free market works. Walgreens, which recently decided against reorganizing in the United Kingdom for lower corporate taxes, found out the old rule about making the "right" decision, and how can it can come back and bite you in the ass, no matter what you do.
With the continued controversy over "inversions," where companies merge with or buy a foreign company to come under that country's corporate tax rate (which is usually a significant saving versus the United States' 35% corporate tax rate, the highest in the entire industrialized world), one would think that a brave company going against the trend would be met with praise. I mean, at the end of the day, Walgreens is still a U.S.-based company, headquarters and all, so that's a good thing, right?
Nope. For all of the yelling and screaming, weeping and gnashing of teeth, and wringing of the hands while hyping petitions to pressure Walgreens, the "victory" was met with a 4% dip of the stock price on Tuesday, when the decision was first announced, and a 15% plunge the following day. See what patriotism gets you, at least as far as Wall Street is concerned? I'm sure people whose pension plans or 401(k) that are invested in Walgreens (NYSE ticker WAG) don't mind losing roughly $16/per share in value since the outrage began. Just maybe skip them the next time round when you have a petition built on breathless panic.
Inversions have become a recent cause for squawking from Capitol Hill, as President Obama and various members of Congress complaining how the practice damages America by siphoning off tax revenue. You know, tax revenue they can put to work by building military aircraft that rusts away unused in the Nevada desert or giving sweetheart loans to dubious energy companies. Never mind the fact there have been nearly four dozen of these "inversions" in the last ten years, but I didn't start hearing a lot about this problem until a company actually decided to stay put.
Talk about the fucking you're taking being worse than the screwing you're getting. Not only did Walgreens buck the trend, they themselves admitted that they didn't even think the Internal Revenue Service was even going to approve the move, and yet, they get spanked like a four year old at Kmart over it. All this tells me is the next company on down the line is going to look directly at this situation, and then say hell with it and relocate anyway. It's not like the IRS can really or truly block a company from making such a move. If the tax code and its 70,000+ pages have shown us anything, it's that there is a loophole around damn near every single part of the code, just so long as you have a healthy-enough bottom line, or are backing the right party in charge at the time.
A final bit of disclosure- While I am not a Walgreens shareholder, I may change that outlook now that the fainting couch crowd has knocked a good-sized chink off the price. I am a Walgreens shopper, however, and hit my local store to pick up a fresh pack of cartridges for my Blu e-cigarette. That way, when I blow a mouthful of smoke in the next petition-waving idiot's face, it will be a bit easier on them. Hope they like vanilla.
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