More than 80 publicly listed companies have tapped the US Treasury’s $350bn bailout fund for keeping small businesses afloat through the economic shutdown, as the ethics of making use of the scheme are hotly debated in Washington and across corporate America.
While the use of the fund by multinational restaurant chains including Shake Shack sparked public anger and a backlash on Capitol Hill, an analysis of public filings by the Financial Times shows that recipients of the money come from a variety of industries, ranging from radio station operators through to biotechs and coal miners.
Some companies have already shown an ability to raise money in the public markets despite the coronavirus lockdowns. One recipient, the electric truck start-up Nikola Motor, is in the throes of a merger with a public company that values it at $4bn.
The disclosures, which included more than a dozen filed on Monday alone, will sharpen discussion in Washington about the design of the bailout scheme, known as the Paycheck Protection Program, which was intended to help ordinary businesses keep employees on payroll and to meet basic operating expenses.
The PPP was fully subscribed last week with many mom-and-pop entrepreneurs unable to secure funding before the first allocation was spoken for.
Congress is expected this week to add hundreds of billions of dollars to the fund, but there have been calls for greater oversight. Shake Shack, which has a market capitalisation of $1.7bn, said on Monday it would give back its $10m PPP loan after an outcry.
“Public companies that have access to other sources of money should not be using this,” said Charles Elson, a corporate governance expert at the University of Delaware. “Small businesses need this pot to survive.”
Ohio-based biotech company Athersys raised almost $60m in a stock offering on Monday after its shares have nearly doubled so far in 2020. Still, the company secured more than $1m through the PPP on Wednesday. The company did not respond to a request for comment.
Several other pre-revenue or low revenue healthcare and biotech companies were also able to secure loans, which carry interest rates of just 1 per cent and can be forgiven entirely if businesses do not dismiss workers.
The FT analysis of Sentieo data identified 83 public companies that had collectively borrowed more than $330m from the PPP, on average $4m each, though the Small Business Administration has trumpeted that the average loan for the programme was just $200,000 among all recipients.
Indiana-based coal miner Hallador Energy took $10m after it had sacked 60 employees in March. Also taking $10m was the data storage company Quantum. Emmis Communications, the dotcom boom star which operates the Hot 97 radio station in New York, borrowed almost $5m, according to a securities filing.
Large restaurant groups including Potbelly and the owner of Ruth’s Chris Steak House disclosed last week that they had each drawn $10m or more, taking advantage of an exemption for restaurant and hotel chains to the rule that otherwise limited PPP funding to businesses with fewer than 500 employees.
The public company recipients identified by the FT had a collective equity value at the end of 2019 of $12bn.
“We have been able to maintain limited US operations in our lab and manufacturing facility in Massachusetts without reducing our workforce thus far,” said Boston-based biotech company Wave Life Sciences, which took a $7m loan. “We are doing everything we can to protect their jobs through this period of uncertainty, which includes applying for the PPP loan that will be used exclusively to support US operations, including payroll.”
Nikola Motor, whose financial backers include the asset management giant Fidelity and the hedge fund ValueAct, secured its $4bn valuation when it announced in early March that it would merge with black-check company VectoIQ. Yet it borrowed $4m from the PPP this month, according to a disclosure by VectoIQ.
Nikola Motor did not respond to request for comment.