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why do these buybacks happen (seemingly) closer to market top rather than bottom? thats just reflecting a common theme across market over last year or so. seems

why do these buybacks happen (seemingly) closer to market top rather than bottom? thats just reflecting a common theme across market over last year or so. seems like a very dumb way to utilize cash on hand. is there a more structural reason for this?

cmer 8y ago
It's all about jacking up the stock price for shareholders. Unfortunately.
- simonsarris 8y ago
  Unfortunately? Shareholders buy shares for two reasons: 1. The share price may go up 2. The dividends pay out These have been the reasons for buying shares since shares of the Dutch East India company was chartered. If neither of these ever happened, there would be no shares purchased. A buyback is just a bonus instead of a salary. You could make the criticism that a company having nothing better to do with its money is bad, and I agree, but in the interim paying it out as a bonus is a great way to reward shareholders for holding. It's also better than a dividend in case next year the company does find something better to invest the money in, because investors really don't like when companies decrease dividends.
pascalxus 8y ago
once the stock price hits certain highs, the CEOs get huge bonuses. So, it doesn't really make sense to buy back when the stock is low.
kevinhiggins 8y ago
Some boards have given CEOs earnings per share based compensation plans, so it’s also a quick way for those to meet their compensation objective. Wise boards don’t structure compensation plans in such a manner, but some do.
astrodust 8y ago
It's often coincidental. The stock is flying high because the company is producing a lot of free cash-flow, and the company can't find a use for the cash so it does a buy-back. When the stock is tanking your company is usually in rough shape and has no money for such reserves for a buy-back, the cash will be necessary to survive or restructure. In those situations, when things get really dicey, they'll do share consolidation. That's often to avoid getting de-listed when their stock price dips too low.

cmer 8y ago

It's all about jacking up the stock price for shareholders. Unfortunately.

simonsarris 8y ago
Unfortunately? Shareholders buy shares for two reasons: 1. The share price may go up 2. The dividends pay out These have been the reasons for buying shares since shares of the Dutch East India company was chartered. If neither of these ever happened, there would be no shares purchased. A buyback is just a bonus instead of a salary. You could make the criticism that a company having nothing better to do with its money is bad, and I agree, but in the interim paying it out as a bonus is a great way to reward shareholders for holding. It's also better than a dividend in case next year the company does find something better to invest the money in, because investors really don't like when companies decrease dividends.

pascalxus 8y ago

once the stock price hits certain highs, the CEOs get huge bonuses. So, it doesn't really make sense to buy back when the stock is low.

kevinhiggins 8y ago

Some boards have given CEOs earnings per share based compensation plans, so it’s also a quick way for those to meet their compensation objective. Wise boards don’t structure compensation plans in such a manner, but some do.

astrodust 8y ago

It's often coincidental. The stock is flying high because the company is producing a lot of free cash-flow, and the company can't find a use for the cash so it does a buy-back. When the stock is tanking your company is usually in rough shape and has no money for such reserves for a buy-back, the cash will be necessary to survive or restructure. In those situations, when things get really dicey, they'll do share consolidation. That's often to avoid getting de-listed when their stock price dips too low.