By Steven Boediarto, Michael Fox & Jeff Sonnek
Recent clarification from the Small Business Administration regarding the CARES Act economic stimulus bill has altered the landscape for public companies receiving forgivable loans under the paycheck protection program. The Administration specified on April 23, 2020 that companies applying for and receiving loans must certify that “the loans are necessary and that they cannot tap other sources of money” (emphasis added). For public companies with access to the capital markets, it raises the question as to whether they can accurately certify to this stipulation. Amidst considerable negative media coverage, it has also led to a call for all public companies to return loans.
Prior to the SBA’s clarification, we identified 171 publicly-listed companies that had disclosed receiving funds under the Act. View the complete list of companies, including a running tabulation of those that have returned funding. It remains to be seen, but can be reasonably expected, that at some point the SBA will produce a list of all companies that received funds under the CARES Act.
Our market intelligence also revealed that companies took a disparate approach to disclosure, with some companies determining the funds were not material and thus not requiring disclosure, while those that did disclose, did so via an 8-K filing, with very few issuing a press release.
Earnings call-related commentary has also been limited so far, with not many examples outside of the restaurant industry, where prominent media coverage has resulted in particular focus. Some companies have proactively signaled that they have NOT taken any funds, likely to head off potential criticism.
While media coverage and general public feedback has highlighted concerns about large businesses receiving CARES Act funds at the expense of small businesses, shareholder feedback has largely been bifurcated with retail investors voicing concerns to companies in line with the general public, and institutional investors generally supportive of any steps companies take to access capital and strengthen balance sheets.