Some Public Companies Took Out PPP Loans Then Paid Dividends And Bought Back Shares

Some publicly traded companies that received loans under the Paycheck Protection Program Flexibility Act, or PPP, subsequently bought shares of their own stock and paid out dividends, raising questions about whether such loans were even needed by some firms.

The Washington Post reported that while the practice is not prohibited, the taxpayer-backed, low-interest forgivable small business loans were mostly designed to pay employees during the early stages of the COVID-19 pandemic. Under the rules of the Small Business Administration, PPP loans could also be used to pay mortgage interest, leases or utility bills. (PPP rules did not specifically ban loan recipients from paying investors as long as they were paid from separate funds).

Still, some large financially viable companies were able to access the loans that were meant for small firms with less than 500 workers.

For example CRH Medical Corp. (CRHM), a Canadian-based medical supply company with American subsidiaries, received a $2.9 million PPP loan in mid-April to support 124 U.S. employees.

“Given the economic uncertainties that CRH and the healthcare industry were facing in March and April when CRH’s loan was applied for and used, these funds were necessary to support the ongoing operations of CRH, to retain or rehire its employees as contemplated by the loan program,” a company spokesman told the Post.

However, since that time CRH has made five acquisitions and bought back almost $230,000 of its shares in the second quarter.