That’s what happens when the oil companies do buybacks instead of investing the money
This way at least the money stay in country, instead of sending overseas checks.
Stock buybacks have destroyed companies like GE and Boeing.
This is very well covered in the book about Boeing - Flying Blind. A bunch of Jack Welch mentees did the same trick, selling the company for parts and buying back the stock - until there was nothing left to sell. It was very "profitable" for a while, though!
It's not a tool for company growth - it's an accounting trick to make the wealthy ultra-wealthy.
There is a reason why buybacks at these levels were illegal (or at least very hard) until the early 80s, but there were multiple pro-big-business "reforms" that took root under Reagan which are now wrecking sensible Capitalism.
Ooh nice, TIL and thanks! I really liked "Lights Out: Pride, Delusion, and the Fall of General Electric" about the failure of GE and was looking for something similar.
On the topic of buybacks and dividends, it's part of the short term quarter-oriented thinking. Spinning off subdivisions and doing stock buybacks and dividends are very popular and look good on the balance sheet in the short term... but if you think about a quarter or two ahead, it's crippling. But it doesn't matter, stock go up, bonus go up, everyone happy for now, kicking the can down the road until it's someone else's problem.
That companies should always operate as worker cooperatives and never return money to shareholders?
Because stock buybacks are just another type of dividends.
Workers are the shareholders in worker cooperatives.
>You don't like fruits!?
But besides that, is there anything that makes buybacks worse than dividends?
Dividends are cleaner and affect the price in well understood ways: you set a date for the elegibility, and if you bought before that you get the dividend, if you buy after you don't.
Stock buybacks are less transparent (you don't buy them all at once).
Which is to say, very little overhead
Dividends also give money to people who have shares.
There is not difference beteeen these two mechanisms in who gets the money.
Like I said, it's the tax treatment that basically stopped growth companies giving dividends. I think that we should change said tax treatment and also make buybacks illegal but that's a bit more controversial.
In any case, for both G and FB, they'd need to do buybacks anyway because of their employee share programs.
Given a certain amount of money, spending it on stock buybacks vs spending it on dividends returns the same amount of money to each HOLDING shareholder.
In one case, they receive a small sum. In the other case, the value of their stock goes up.
The alternative to stock buybacks is that the corporation make stupid acquisitions and try to integrate them into their processes, thereby killing them.
In fact every society which tried to take all of their money away and eliminate them as a class (more or less violently) has failed economically. Turns out when it works properly free market competition is strongest force for economic and technological progress that has ever existed.
Stock buybacks only benefit shareholders and companies, not the economie. Trickle down and all that doesn't work, stock buybacks reduce a companies tax burden, especially when leveraged which they often are, do not lead to more investment. And they make the rich even richer.
See, for example, here:
https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...
And salaries rise, primarily, through labour organization and collective bargaining.
I'm all for it as a employee AND a shareholder.
> And salaries rise, primarily, through labour organization and collective bargaining.
No. Supply and demand is and pretty much always was a much stronger force.
I believe the parent commenter's point was exactly this. Giving money to the investor class and expecting it to benefit everyone is the definition of trickle-down economics.