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>Businesses use debt in all sorts of ways, they certainly don't limit it to buying assets. A common use recently is to fund share buybacks You don't think buyi
by forgetsusername 11y ago
>Businesses use debt in all sorts of ways, they certainly don't limit it to buying assets. A common use recently is to fund share buybacks
You don't think buying a stake in a successful company (in this case one that happens to be your own) is buying an asset? The mechanations are slightly different, but you're still buying shares. An effect is rising EPS (due to retired shares), but that isn't the purpose.
- jonknee 11y agoNot at all, it's a giveaway to executives (who get bonuses based on EPS) and long term shareholders. Some firms also borrow money to fund a dividend which is just a literal giveaway.
- forgetsusername 11y ago>Not at all, it's a giveaway to executives (who get bonuses based on EPS) and long term shareholders. Putting aside the executive giveaway (because I have a hard time believing that there are executive bonuses so intertwined with EPS that the company can just burn money on buybacks to increase that bonus without any external fuss or anyone questioning why)... ...who or what else matters beyond the shareholders? Share buybacks aren't a scam. They exist as a method to return capital to shareholders and can be smart or not depending on a variety of financial circumstances. Just like every other financial decision. http://aswathdamodaran.blogspot.ca/2014/09/stock-buybacks-they-are-big-they-are.html http://aswathdamodaran.blogspot.ca/2014/09/stock-buybacks-th...
- ska 11y agobut that isn't the purpose Sometimes that is precisely the purpose.