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Publicly traded companies and large firms that have previously been penalized by the government were among those that received millions of dollars from a coronavirus relief fund designed by Congress to help small businesses weather the economic crisis.
A new investigation by The Associated Press found that at least 75 publicly traded companies -- some with market values well over $100 million -- tapped the government-backed Paycheck Protection Program. And 25 percent of those companies warned investors months ago, well before the virus outbreak began to batter the U.S. economy, that their ability to remain in business was questionable.
Combined, those 75 companies received $300 million in low-interest loans, the AP found. Eight companies, or their subsidiaries, received the $10 million maximum under the Paycheck Protection Program, which ran out of funds last Thursday. One of those companies, a California software company, settled a Securities and Exchange Commission investigation last year into overstated revenue.
The loans were among the 4,412 approved by banks and the Small Business Administration worth $5 million or more, according to SBA data. The total amount of loans approved for at least $5 million totaled $30.9 billion — or about 9 percent of all those approved. The size of the typical loan nationally was $206,000, according to the data.
When Congress created the $349 billion program, it directed the loans at companies with fewer than 500 employees. But restaurants and hotels were granted some flexibility in the legislation — so long as they employed no more than 500 workers at any single location, they could apply for the aid.
The money can be used for payroll and other expenses, like insurance premiums, mortgages, rent or utilities through June 30. As long as 75 percent of the money goes toward keeping workers employed and maintaining salary levels, the loans, which are guaranteed by the federal government, will be fully forgiven.
Asked Sunday whether large, publicly traded companies should be eligible for PPP cash, President Trump said: “I don’t know much about any of those companies. But a lot of times they’re owned by franchisees, where they own one or two places. So a lot of that would depend on what the formula is.”
The AP report also found instances where companies that had foreign owners and that were delisted from U.S. stock exchanges -- or threatened with removal because of poor stock performance before the virus-triggered downturn -- secured loans. Some companies have had annual losses for years.
One company, Wave Life Sciences USA Inc., a Boston-area biotechnology company that develops pharmaceuticals, received a $7.2 million loan, the AP said. But weeks earlier, Wave Life Sciences, whose parent company is based in Singapore, reported net losses of $102 million, $147 million and $194 million over the last three fiscal years.
“The livelihood of our U.S. employees and their families would be severely disrupted if they were to lose their jobs or be furloughed. We are doing everything we can to support them,” the company said in a statement to the AP.
The backlash against the program began this week, after national restaurant chains that employed thousands of workers before the crisis secured millions of dollars in small-business loans. Among the companies were Potbelly Corp., the nationwide sandwich shop chain, and Ruth's Hospitality Group, which operates a series of steakhouses.
On April 10, Potbelly secured a $10 million loan from JPMorgan Chase through the program at an interest rate of 0.98 percent, according to a regulatory filing. The company said the money will go toward “qualifying expenses.” Ruth’s said in an SEC filing that two of its subsidiaries were granted loans on April 7 by JPMorgan for a total of $20 million. The money will go primarily toward payroll costs, it said. Under the program, the maximum loan a company can receive is $10 million or up to 2.5 times its operating cost.
Facing growing anger, Shake Shack said Monday it will return the $10 million loan it received, making it the first major firm to give back the money intended to protect small businesses. The burger chain runs close to 189 restaurants in the U.S., with about 45 employees in each location. In 2019, it reported revenue of roughly $600 million.
In a statement to the AP, Treasury Secretary Steven Mnuchin said that 74 percent of the loans were for less than $150,000, demonstrating “the accessibility of this program to even the smallest of small businesses.”