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>The biggest example we have is the way big corporations are furiously repurchasing their own stock. This is a huge fortune spent every few days for no producti
by alasdair_ 7y ago
>The biggest example we have is the way big corporations are furiously repurchasing their own stock. This is a huge fortune spent every few days for no productive reason, with the only goal of making big company returns to look more attractive than they are.
Stock buybacks are the same thing financially as a corporation issuing dividends except that with a buyback, the holder isn't forced to take a taxable event. It's almost always better for the owners to receive buybacks rather than dividends, especially if the owners pay income taxes.
- coliveira 7y agoThey're not the same thing financially: with dividends, it is much easier for shareholders to invest the money in some other company that is better managed. Stock buybacks give the illusion of profit growth, when in fact the profits per share are engineered by company executives. The biggest winners in this arrangement are without question the executives, who practically guarantee share growth and, therefore, large bonuses.
- shuckles 7y agoIt is not an illusion. Companies state the buyback amounts and outstanding shares. The market for the most part is quite savvy and knows how to price in these mechanical changes. Nobody is being fooled at scale.
- navigatesol 7y agoOh brother. There's no illusion. I guess the average guy off the street doesn't get it, but no one in the finance world is fooled into believing a share buyback increased profit. Not a single one. It decreases share count in exchange for cash. Pure balance sheet transaction.