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I think buybacks have occasional legitimate uses, but there’s a reason that they were considered basically illegal not that long ago I think if companies are s
by eries 6y ago
I think buybacks have occasional legitimate uses, but there’s a reason that they were considered basically illegal not that long ago
I think if companies are sincere in their desire to use buybacks only for good purposes, they should commit to report “EPS net of buybacks”
- dasudasu 6y agoThey do. The number of shares outstanding is publicly reported. You can already divide earnings any way you want yourself. To me shares buyback is just the counterpart to selling shares on the open market to raise capital. It’s anti-dilutive and can be in the interest of shareholders.
- vmception 6y agoDisclaimer: I can take any side of the regulatory pendulum with a straight face, and that also means pointing out accurate statements with no real opinion on either. Buybacks were illegal because it falsely showed demand in the market. False demand is a key point in modern market manipulation and fraud cases. Given that reality dissolved 30 years ago, of course we are all familiar with the arguments "It’s anti-dilutive and can be in the interest of shareholders"
- alasdair_ 6y agoMy understanding is that stock buybacks are generally better than issuing a dividend for the simple reason that with a buyback, an owner can choose to sell (and incur a taxable event) or not sell, while with a dividend the taxable event is forced upon them.
- vmception 6y agoA convenient reality as they can also just be used to constrict the supply of shares on market more and more, which is what they do. How also convenient that it can result in gains much more amplified than dividends. Yes, your observation is also true. But lets not pretend companies were really trying to choose between dividends and buybacks, most don't do dividends and ultimately never return capital to shareholders, which is the point of stock: to act as a conduit in sharing earnings.
- alasdair_ 6y ago> But lets not pretend companies were really trying to choose between dividends and buybacks I’m not pretending. And most companies eventually are designed to return capital to shareholders - otherwise why would anyone buy them?
- mjul 6y agoThere is also the tax perspective: in many jurisdictions dividends and capital gains are taxed differently, often with a higher tax on dividends. In that case buybacks are better for investors.
- MrPowers 6y agoAligning executive compensation with shareholder interests would also help. Stock options incentivize executives to buy back shares (boost the price, do a buy back, exercise options).
- eries 6y agoYes, compensation reforms are a key part of making this work. All sides need to come together for mutual gain, if we want to build better companies
- bostonsre 6y agoDo you think fraudulent business practices would be able to hide more easily and for longer periods in the ltse exchange? I'm wondering if fewer large traders that focus on short term profits would mean less eyes would be focused on companies so that it would be easier to hide fraudulent activities.