The stock gains of the Obama era are partly a reflection of the resilience of American business in a tough environment, but they may also result in part from the Federal Reserve’s monetary exertions. Perhaps Mr. Hoffman decided this is the time to sell near the top.
It’s clear how government policies are shaping the financing of the LinkedIn deal. As of March 31, Microsoft’s balance sheet held more than $105 billion in cash, cash equivalents and short-term investments. You would think it would pay cash for LinkedIn.
But the U.S. has the industrialized world’s highest corporate income tax rate and insists on taxing foreign profits when they return to the U.S. So according to Microsoft’s most recent quarterly report, nearly $103 billion of the cash was held “by our foreign subsidiaries and would be subject to material repatriation tax effects.” With the Fed still holding interest rates near zero, Microsoft plans to borrow most or all the cash to complete the purchase.