4 ms·

I agree, and I think Apple is an example of a company that uses debt in a perfectly sensible way. My fear is that these debt fueled buybacks actually create pe

• airstrike 7y ago
  > My fear is that these debt fueled buybacks actually create perverse incentives among options holders who have a lot to gain from short term gains in share prices. Reckless increasing your leverage is a great way to destroy equity value due not only to increased interest expense but also from the cost of financial distress which investors price into their models. Which is not to say companies don't do that – there's definitely a wedge between what's best for shareholders and what's best for management¹, but there's no way around it other than having shareholders run the company themselves (which comes with its own set of issues) 1. https://en.wikipedia.org/wiki/Agency_cost https://en.wikipedia.org/wiki/Agency_cost