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Stock buybacks are substantially equivalent to dividends. You issue a dividend when you have nothing to invest in that will develop shareholder value. Buyba

Stock buybacks are substantially equivalent to dividends. You issue a dividend when you have nothing to invest in that will develop shareholder value. Buybacks work the same way. You have a stock of capital, or a great borrowing opportunity, and nothing to do with it. Most companies always have another idea to do a new thing, that might induce growth. WW did not. WW has been in trouble for decades, because their business model pre-supposes consumers are too stupid to use a search engine. (Does "weight watchers" work? No. No it doesn't.) The debt-for-buyback swap is a symptom, not a cause. Management had nowhere to go, no vision for growth, and when you are out of ideas and you are offered an attractive loan, you do a buyback.

cortesoft 1y ago
A company can also decide to do stock buybacks if the leadership thinks its stock is undervalued.
niemandhier 1y ago
Buybacks also protect you from hostile takeovers, or from a competitor buying shares until they are entitled to a seat on the board. The latter was the the end of several large German companies.
dehrmann 1y ago
> Stock buybacks are substantially equivalent to dividends There's a whole theory on this: https://www.investopedia.com/terms/d/dividendirrelevance.asp https://www.investopedia.com/terms/d/dividendirrelevance.asp The easy way to see it is if all shareholders reinvest dividends, it's the same as a share buyback, only with the broker buying shares on your behalf rather than the company, and your ownership of the company includes a bonus fractional share. Dividends are also a bit of an accounting game. You can pay yourself a "dividend" whenever you want buy selling shares. This is only 95% true, but if your share in a company just entitled you to 65 cents, the share is probably worth about 65 cents less since the money came from somewhere.

cortesoft 1y ago

A company can also decide to do stock buybacks if the leadership thinks its stock is undervalued.

niemandhier 1y ago

Buybacks also protect you from hostile takeovers, or from a competitor buying shares until they are entitled to a seat on the board. The latter was the the end of several large German companies.

dehrmann 1y ago

> Stock buybacks are substantially equivalent to dividends There's a whole theory on this: https://www.investopedia.com/terms/d/dividendirrelevance.asp https://www.investopedia.com/terms/d/dividendirrelevance.asp The easy way to see it is if all shareholders reinvest dividends, it's the same as a share buyback, only with the broker buying shares on your behalf rather than the company, and your ownership of the company includes a bonus fractional share. Dividends are also a bit of an accounting game. You can pay yourself a "dividend" whenever you want buy selling shares. This is only 95% true, but if your share in a company just entitled you to 65 cents, the share is probably worth about 65 cents less since the money came from somewhere.