4 ms·

This is a deeply strange article. Why are stock buybacks manipulating? If there are 100 shares of a $1M company, each share is worth $10K. If I own 800 share

by tdees40 11y ago

This is a deeply strange article. Why are stock buybacks manipulating? If there are 100 shares of a $1M company, each share is worth $10K. If I own 800 shares and you own 200, and the company has some cash lying around, maybe it will buy your shares. Now there are 800 shares outstanding, and if the company is still worth $1M, each share is now worth $12,500. Did I manipulate the share price? What's the point of calling it that, besides to make it sound nefarious, when it's just an everyday business practice?

wcummings 11y ago
>and the company has some cash lying around Does your opinion change if they're taking on debt / shrinking their business to buyback shares? >The company’s executives said that to help finance the plan, McDonald’s would increase refranchising (turning company-owned restaurants into franchises), take on more debt (even at the risk of lowering its bond rating), and find $300 million to cut in general and administrative expenses. It doesn't sound like its a case of McDonalds having a pile of cash
- tdees40 11y ago
  Maybe let's put it a different way: if you and I are partners in a business, and I decide to take out a second mortgage and buy you out, is that a bad thing? What if I have to sell a slice of the business to pay off that mortgage? I dunno, this all seems reasonable, and if it's reasonable for one person, then I think it's reasonable for a corporation.
justaman 11y ago
By manipulating stock price they change the dividend play. I suppose they are attempting to instil the idea that they are not going anywhere in the minds of investors. IMO the issue McDonald's is facing is the degradation of its public image. Simply put, McDonald's is what homeless people eat(low in price, high in calories). In the last two or three decades new burger joints have emerged that fill the gap between the dollar menu burger and the $10 restaurant burger. Places like Culver's and In-and-Out have taken a larger slice of the _burger_. You can see them combating this with the aggressive advertising towards millennials; the trend-setters. The new non-GMO simple chicken sandwich is a glaringly obvious admittance that their prior adverts failed. To fix McDonald's, their only option is to use their superior distribution network to produce marginally higher quality food that is on par with the aforementioned. The perceived public image will improve itself overtime.
- tdees40 11y ago
  It's hard because McDonald's has negative brand equity in a lot of people's eyes (certainly in mine). It would almost be better if they were starting from scratch.

by tdees40 11y ago

wcummings 11y ago

>and the company has some cash lying around Does your opinion change if they're taking on debt / shrinking their business to buyback shares? >The company’s executives said that to help finance the plan, McDonald’s would increase refranchising (turning company-owned restaurants into franchises), take on more debt (even at the risk of lowering its bond rating), and find $300 million to cut in general and administrative expenses. It doesn't sound like its a case of McDonalds having a pile of cash

tdees40 11y ago
Maybe let's put it a different way: if you and I are partners in a business, and I decide to take out a second mortgage and buy you out, is that a bad thing? What if I have to sell a slice of the business to pay off that mortgage? I dunno, this all seems reasonable, and if it's reasonable for one person, then I think it's reasonable for a corporation.

justaman 11y ago

By manipulating stock price they change the dividend play. I suppose they are attempting to instil the idea that they are not going anywhere in the minds of investors. IMO the issue McDonald's is facing is the degradation of its public image. Simply put, McDonald's is what homeless people eat(low in price, high in calories). In the last two or three decades new burger joints have emerged that fill the gap between the dollar menu burger and the $10 restaurant burger. Places like Culver's and In-and-Out have taken a larger slice of the _burger_. You can see them combating this with the aggressive advertising towards millennials; the trend-setters. The new non-GMO simple chicken sandwich is a glaringly obvious admittance that their prior adverts failed. To fix McDonald's, their only option is to use their superior distribution network to produce marginally higher quality food that is on par with the aforementioned. The perceived public image will improve itself overtime.

tdees40 11y ago
It's hard because McDonald's has negative brand equity in a lot of people's eyes (certainly in mine). It would almost be better if they were starting from scratch.