3 ms·

How is this outcome bad?

niggler 14y ago
Under the buyback, long-term investors who have held on for the 16 years have lost nearly $2/sh. Under the dividend they would have made at least $18/sh. There's a positive feedback cycle: Companies show a disregard for long-term shareholders; large investors, seeing how they are being ignored, focus on short-term investments; Companies see that investors are interested in the short-term and don't play the long game.
- rgbrenner 14y ago
  with the buyback, those who did not sell any shares owned a larger percentage of the company than before the buy back. with the buyback, those who sold shares reduced their percentage ownership of the company. If they did not want to receive a larger percentage, then they could have sold a portion of their shares equal to the percentage being repurchased. If they had done that, they would have received what would have been equal to the dividend. In other words, there is no difference between a dividend and a buyback -- they both return money to the shareholders.
  - niggler 14y ago
    That would be true if the buyback happened at a price close to market value. Two things happened: 1) the buybacks had to be higher than market value (reducing value for the residual shares) 2) the performance was weak (amplifying the loss since the share count was reduced)
    - rgbrenner 14y ago
      those points do not change anything. 1) those who refused to resell were implicitly saying their shares were worth more than the buyback price. Else they would have sold. It does not change the fact that they could have received what would have been equal to a dividend if they would have sold a portion of their shares equal to the portion dell wanted to buy back. 2) the performance of Dell in the future is a separate issue from share buybacks. Those who refused to sell their shares thought Dell was worth more than the buyback price -- indicating they expected strong growth in the future. That was a bad investment decision on their part.

Under the buyback, long-term investors who have held on for the 16 years have lost nearly $2/sh. Under the dividend they would have made at least $18/sh. There's a positive feedback cycle: Companies show a disregard for long-term shareholders; large investors, seeing how they are being ignored, focus on short-term investments; Companies see that investors are interested in the short-term and don't play the long game.

rgbrenner 14y ago
with the buyback, those who did not sell any shares owned a larger percentage of the company than before the buy back. with the buyback, those who sold shares reduced their percentage ownership of the company. If they did not want to receive a larger percentage, then they could have sold a portion of their shares equal to the percentage being repurchased. If they had done that, they would have received what would have been equal to the dividend. In other words, there is no difference between a dividend and a buyback -- they both return money to the shareholders.
- niggler 14y ago
  That would be true if the buyback happened at a price close to market value. Two things happened: 1) the buybacks had to be higher than market value (reducing value for the residual shares) 2) the performance was weak (amplifying the loss since the share count was reduced)
  - rgbrenner 14y ago
    those points do not change anything. 1) those who refused to resell were implicitly saying their shares were worth more than the buyback price. Else they would have sold. It does not change the fact that they could have received what would have been equal to a dividend if they would have sold a portion of their shares equal to the portion dell wanted to buy back. 2) the performance of Dell in the future is a separate issue from share buybacks. Those who refused to sell their shares thought Dell was worth more than the buyback price -- indicating they expected strong growth in the future. That was a bad investment decision on their part.