3 ms·

Yes, it's a way for companies with massive profits to route them to their employees (read: executives), not their shareholders.

Ekaros 4y ago
And manipulate the stock prices to look to perform better than it should. They could just pay dividends, but then some argue those would be taxed at time where as buybacks are only if sold later at profit.
- seanmcdirmid 4y ago
  Dividends are taxed twice, as corporate income then as personal income to whoever they are granted to (at least to Americans, other countries have different tax rules). A buy back is only taxed as personal income when granted to the employee.
  - lotsofpulp 4y ago
    What about the capital gains tax for the entity the company is buying the share from?
    - seanmcdirmid 4y ago
      If it is like a 401K fund, the tax is deferred (it will be treated income rather than capital gains later). But they also wouldn't have had to charge tax right away for dividends (dividends are re-invested into the fund, and taxed as income later).
- JumpCrisscross 4y ago
  > manipulate the stock prices to look to perform better than it should They're taking actions that raise the stock price. That hardly counts as manipulation. (It would count as manipulation if the buyback were conveniently timed to coincide with share-price incentives.)
  - seanmcdirmid 4y ago
    The money used for the buyback makes the company worth less, so it should be neutral if the share price was accurate. It never is of course.
    - JumpCrisscross 4y ago
      > money used for the buyback makes the company worth less, so it should be neutral if the share price was accurate Assets decrease. But so does the share count. This tends to raise earnings per share while decreasing assets per share [1]. (Liquid assets, particularly [2].) Meanwhile, there are signaling and liquidity factors which raise the theoretical value of the company. In summary, there is no rule that says a buyback should be share-price neutral. (The same for special dividends.) [1] https://www.nasdaq.com/articles/does-stock-buyback-affect-price-2016-01-03 https://www.nasdaq.com/articles/does-stock-buyback-affect-pr... [2] https://business.inquirer.net/238377/share-buybacks-affect-stock-prices https://business.inquirer.net/238377/share-buybacks-affect-s...
      - seanmcdirmid 4y ago
        Assets re-invested back into the company rather than through a stock buyback could have increased earnings/share also. Of course, you eventually run out of things to re-invest earnings into (that could lead to more earnings rather than being wasted), and have to decide whether to do a dividend or a stock buyback.

Ekaros 4y ago

And manipulate the stock prices to look to perform better than it should. They could just pay dividends, but then some argue those would be taxed at time where as buybacks are only if sold later at profit.

seanmcdirmid 4y ago
Dividends are taxed twice, as corporate income then as personal income to whoever they are granted to (at least to Americans, other countries have different tax rules). A buy back is only taxed as personal income when granted to the employee.
- lotsofpulp 4y ago
  What about the capital gains tax for the entity the company is buying the share from?
  - seanmcdirmid 4y ago
    If it is like a 401K fund, the tax is deferred (it will be treated income rather than capital gains later). But they also wouldn't have had to charge tax right away for dividends (dividends are re-invested into the fund, and taxed as income later).
JumpCrisscross 4y ago
> manipulate the stock prices to look to perform better than it should They're taking actions that raise the stock price. That hardly counts as manipulation. (It would count as manipulation if the buyback were conveniently timed to coincide with share-price incentives.)
- seanmcdirmid 4y ago
  The money used for the buyback makes the company worth less, so it should be neutral if the share price was accurate. It never is of course.
  - JumpCrisscross 4y ago
    > money used for the buyback makes the company worth less, so it should be neutral if the share price was accurate Assets decrease. But so does the share count. This tends to raise earnings per share while decreasing assets per share [1]. (Liquid assets, particularly [2].) Meanwhile, there are signaling and liquidity factors which raise the theoretical value of the company. In summary, there is no rule that says a buyback should be share-price neutral. (The same for special dividends.) [1] https://www.nasdaq.com/articles/does-stock-buyback-affect-price-2016-01-03 https://www.nasdaq.com/articles/does-stock-buyback-affect-pr... [2] https://business.inquirer.net/238377/share-buybacks-affect-stock-prices https://business.inquirer.net/238377/share-buybacks-affect-s...
    - seanmcdirmid 4y ago
      Assets re-invested back into the company rather than through a stock buyback could have increased earnings/share also. Of course, you eventually run out of things to re-invest earnings into (that could lead to more earnings rather than being wasted), and have to decide whether to do a dividend or a stock buyback.