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They spent billions on buy backs. At some point [1] ~80% of their market value. Really a shame [1] https://www.fool.com/investing/general/2016/04/25/after-fork

They spent billions on buy backs. At some point [1] ~80% of their market value. Really a shame [1] https://www.fool.com/investing/general/2016/04/25/after-forking-out-110-billion-on-stock-buybacks-ib.aspx https://www.fool.com/investing/general/2016/04/25/after-fork...

throwaway287391 6y ago
I don't know how this whole buyback thing works really, but could they not just do a "sellback" of some of the shares they still own if they now need the cash? (Of course they might have to do so at a bit of a loss.)
- willcipriano 6y ago
  As I understand a proportion of buybacks generally (maybe not at IBM) were financed by debt. If this was the case they would have to sell enough to cover the debt and interest first.
- findthewords 6y ago
  In theory, yes, they could protect their workers' job security with a stock offering. They are incentivised to protect the interests of their shareholders. Unions are set up to (N/A in USA) protect the workers.
  - throwaway287391 6y ago
    Agreed, but then it seems to me that the buybacks are kind of besides the point, and the real underlying issue is that they don't care about their workers (and/or aren't incentivized to), no? In terms of future flexibility / robustness to unforeseen emergencies, sitting on a big pile of your own stock doesn't seem that different to me from sitting on a big pile of cash, except in terms of the risk profile. (In contrast to paying a dividend, where they really can't recoup the cash if they need it.) I could easily be missing something though...
    - lotsofpulp 6y ago
      > that they don't care about their workers (and/or aren't incentivized to), no? It is generally assumed that decision makers will care more about their own wealth than other people’s wealth.
      - throwaway287391 6y ago
        Right, I'm just trying to understand the notion that stock buybacks are somehow particularly bad in this regard.
    - zb 6y ago
      They’re not ‘sitting on’ a pile of stock; it gets bought back and cancelled. A company can issue more stock any time it likes, so in that sense every company is ‘sitting on’ an infinite pile of its own stock all the time.
      - throwaway287391 6y ago
        Ah, thank you. I didn't understand that and now this all makes a bit more sense to me.
      - snuxoll 6y ago
        A company doesn't have to destroy the shares they buy back, they can opt to retain them and use them for employee compensation or later reoffer them.
- markvdb 6y ago
  The easiest way to do so might be a choice dividend: cash or stock.
- pravus 6y ago
  Yes. When you see articles about companies raising money through the secondary market or by issuing stock, that is exactly what is happening. An IPO is just the initial offering of stock onto the secondary market. After that the company can continue to raise money by creating and offering more shares for sale. You will also see companies offer other instruments such as bonds and preferred shares which have different legal implications for investors.
- snarf21 6y ago
  Of course they could but dumping all those shares on the market to be sold would lower the stock price. The C-suite isn't interested in their compensation going down, easier to cut costs which may additionally make their compensation go up. It isn't about building a good solid company, it is about getting while the getting is good.

throwaway287391 6y ago

I don't know how this whole buyback thing works really, but could they not just do a "sellback" of some of the shares they still own if they now need the cash? (Of course they might have to do so at a bit of a loss.)

willcipriano 6y ago
As I understand a proportion of buybacks generally (maybe not at IBM) were financed by debt. If this was the case they would have to sell enough to cover the debt and interest first.
findthewords 6y ago
In theory, yes, they could protect their workers' job security with a stock offering. They are incentivised to protect the interests of their shareholders. Unions are set up to (N/A in USA) protect the workers.
- throwaway287391 6y ago
  Agreed, but then it seems to me that the buybacks are kind of besides the point, and the real underlying issue is that they don't care about their workers (and/or aren't incentivized to), no? In terms of future flexibility / robustness to unforeseen emergencies, sitting on a big pile of your own stock doesn't seem that different to me from sitting on a big pile of cash, except in terms of the risk profile. (In contrast to paying a dividend, where they really can't recoup the cash if they need it.) I could easily be missing something though...
  - lotsofpulp 6y ago
    > that they don't care about their workers (and/or aren't incentivized to), no? It is generally assumed that decision makers will care more about their own wealth than other people’s wealth.
    - throwaway287391 6y ago
      Right, I'm just trying to understand the notion that stock buybacks are somehow particularly bad in this regard.
  - zb 6y ago
    They’re not ‘sitting on’ a pile of stock; it gets bought back and cancelled. A company can issue more stock any time it likes, so in that sense every company is ‘sitting on’ an infinite pile of its own stock all the time.
    - throwaway287391 6y ago
      Ah, thank you. I didn't understand that and now this all makes a bit more sense to me.
    - snuxoll 6y ago
      A company doesn't have to destroy the shares they buy back, they can opt to retain them and use them for employee compensation or later reoffer them.
markvdb 6y ago
The easiest way to do so might be a choice dividend: cash or stock.
pravus 6y ago
Yes. When you see articles about companies raising money through the secondary market or by issuing stock, that is exactly what is happening. An IPO is just the initial offering of stock onto the secondary market. After that the company can continue to raise money by creating and offering more shares for sale. You will also see companies offer other instruments such as bonds and preferred shares which have different legal implications for investors.
snarf21 6y ago
Of course they could but dumping all those shares on the market to be sold would lower the stock price. The C-suite isn't interested in their compensation going down, easier to cut costs which may additionally make their compensation go up. It isn't about building a good solid company, it is about getting while the getting is good.