The 3% EU Charge for Internet Sales Scheduled for May

[william the wie]

The EU is doing this because whether they are vendors or advertising media the rankings are mostly American or to a lesser degree Chinese until you get down into the odds and sods. But since most internet companies are still being priced as growth companies and have contribution margins less than 3% there will likely be big side effects like a huge shrinkage of both PE and sales growth.

Since I write puts on issues that:

A) sell less for tangible asset value

B) a PE/PEG ratio of less than one;

I do not have any positions in any tech stocks. I don't know nor care about what happens to the tech stocks per se. So, I am wondering about side effects to the market in general, any guesses as to what the knock on effects can be expected?

 

[justinacolmena]

The EU has already long since imposed a full VAT (Value Added Tax) 30%+ on imports from the U.S., and the 3% Internet tax would be on top of that in retaliation for Trump's tariffs.

EU businesses (and consumers) who buy domestic goods rather than import them, often, I believe, get a break on the VAT, and there are reciprocal tax break agreements among EU countries and Canada, from which the U.S. is excluded. It is unclear to me to what extent Asia is favored by European trade policies.

I do not like the concept of a "growth stock" -- eternally promised dividends that are never delivered to the investor. If a business -- already large enough to issue publicly traded stock -- is not profitable remaining the same size, then it should be working on reducing variable costs and overhead rather than "growing" so aggressively.

History has shown that managers of "growth companies" often have delusions of grandeur, and engage in aggressive merger and acquisition activity that only serves to destroy shareholder value.