4 ms·

Why is me buying my own book to bring it to the best seller list any different than any other purchaser? Stocks are supposed to be a share of ownership in a co

by Drakim 3y ago

Why is me buying my own book to bring it to the best seller list any different than any other purchaser? Stocks are supposed to be a share of ownership in a company, and the price goes up and down because being an owner of a company goes up and down in desirability, based on how well the company is doing. Just like with buying your own book, buying your own stock artificially increases the desirability.

bvaldivielso 3y ago
This is a misunderstanding of what stock buybacks are. Companies do not buy their stock from themselves. They buy the stock from participants in the market. Following your example, it'd be like the author of a book buying the book they wrote from someone else. If the author chooses to pay someone else 1000$ for their book, they can, but they will be wasting money. A company doing a stock buyback is trading off their own capital (they have to spend it, it's not an infinite money glitch where they buy it from themselves) to get back shares of the company itself at the then-market-price. The market chooses whether that's a good trade. It may not
pas 3y ago
that's an argument for why best seller lists are stupid. companies can create new stock anytime out of thin air, and that decreases the price. why can't they do the opposite? some owners of the company decide to buy stocks from the others, thus consolidating ownership. that's what stock buyback is. note, the argument for taxing buybacks is completely different, and valid. (and it might make sense, it might not, it depends on the circumstances. externalities tax (pollution, tax on induced traffic, etc), LVT (land value tax) and wealth tax would be much better, than taxing transactions.)
- jmholla 3y ago
  > companies can create new stock anytime out of thin air, and that decreases the price. why can't they do the opposite? So at any point, a company can devalue existing shares that people have already purchased? That also sounds like a problem.
  - pas 3y ago
    sure it can be securities fraud, but usually it's done to attract more investors. companies on stock exchanges usually do stock splits, etc. (and based on bylaws majority or 2/3rs or more of existing owners need to approve.)
  - akvadrako 3y ago
    If companies couldn't issue stock there wouldn't be a stock market at all.
robertlagrant 3y ago
> Why is me buying my own book to bring it to the best seller list any different than any other purchaser? What's the best-seller list in this case?

by Drakim 3y ago

bvaldivielso 3y ago

This is a misunderstanding of what stock buybacks are. Companies do not buy their stock from themselves. They buy the stock from participants in the market. Following your example, it'd be like the author of a book buying the book they wrote from someone else. If the author chooses to pay someone else 1000$ for their book, they can, but they will be wasting money. A company doing a stock buyback is trading off their own capital (they have to spend it, it's not an infinite money glitch where they buy it from themselves) to get back shares of the company itself at the then-market-price. The market chooses whether that's a good trade. It may not

pas 3y ago

that's an argument for why best seller lists are stupid. companies can create new stock anytime out of thin air, and that decreases the price. why can't they do the opposite? some owners of the company decide to buy stocks from the others, thus consolidating ownership. that's what stock buyback is. note, the argument for taxing buybacks is completely different, and valid. (and it might make sense, it might not, it depends on the circumstances. externalities tax (pollution, tax on induced traffic, etc), LVT (land value tax) and wealth tax would be much better, than taxing transactions.)

jmholla 3y ago
> companies can create new stock anytime out of thin air, and that decreases the price. why can't they do the opposite? So at any point, a company can devalue existing shares that people have already purchased? That also sounds like a problem.
- pas 3y ago
  sure it can be securities fraud, but usually it's done to attract more investors. companies on stock exchanges usually do stock splits, etc. (and based on bylaws majority or 2/3rs or more of existing owners need to approve.)
- akvadrako 3y ago
  If companies couldn't issue stock there wouldn't be a stock market at all.

robertlagrant 3y ago

> Why is me buying my own book to bring it to the best seller list any different than any other purchaser? What's the best-seller list in this case?