Lawmakers Question Stock Buybacks by BAE, Chips Act Beneficiary
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(Bloomberg) -- Two Democratic lawmakers are raising concerns about a history of stock buybacks at BAE Systems Plc, parent of the first recipient of US subsidies for semiconductor production.
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Senator Elizabeth Warren of Massachusetts and Representative Sean Casten of Illinois wrote a letter to Tom Arseneault, the chief executive officer of BAE’s American subsidiary, citing the British aerospace giant’s use of stock buyback programs before and during the period in which it would have been negotiating its $35 million award from the 2022 Chips Act.
Read more: US Gives Defense Firm BAE $35 Million in First Chips Grant
The Chips Act set aside $39 billion in grants and $75 billion in loans and loan guarantees to bolster the American semiconductor industry after decades of production abroad. The Commerce Department, which is administering those funds, has warned that awards could be withheld or clawed back if companies didn’t meet criteria spelled out in the application process.
Among the strings attached is a ban on using federal funding to support stock buybacks, as well as a preference for applicants that refrain from such programs for five years after receiving an award.
Earlier: Biden Bars Companies From Using US Chips Act Cash for Buybacks
Warren and Casten said they doubted BAE’s intentions to comply with those guardrails, citing shareholder payments of almost $9.4 billion in stock buybacks and dividends in the decade leading up to passage of the Chips Act.
Last June — several months before BAE’s award was announced — the company commenced a $2 billion stock buyback program and authorized an additional $2 billion over the next three years, the lawmakers wrote.
“BAE Systems’ track record of extensive stock buyback programs raises serious concerns about its willingness to forgo buybacks at the expense of the capital needed for the investments expected of Chips funding recipients,” Warren and Casten wrote.
BAE Systems Inc, a separate US entity from BAE Systems Plc, plans to use the Chips Act money to upgrade equipment at its facility in Nashua, New Hampshire. The firm didn’t immediately respond to a request for comment on Tuesday night. The Commerce Department declined to comment.
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