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Comment by DodgyEggplant | Hacker News Reader

They spent billions on buy backs. At some point [1] ~80% of their market value. Really a shame

[1] https://www.fool.com/investing/general/2016/04/25/after-fork...

I don't know how this whole buyback thing works really, but could they not just do a "sellback" of some of the shares they still own if they now need the cash? (Of course they might have to do so at a bit of a loss.)

Yes. When you see articles about companies raising money through the secondary market or by issuing stock, that is exactly what is happening. An IPO is just the initial offering of stock onto the secondary market. After that the company can continue to raise money by creating and offering more shares for sale. You will also see companies offer other instruments such as bonds and preferred shares which have different legal implications for investors.

As I understand a proportion of buybacks generally (maybe not at IBM) were financed by debt. If this was the case they would have to sell enough to cover the debt and interest first.

Of course they could but dumping all those shares on the market to be sold would lower the stock price. The C-suite isn't interested in their compensation going down, easier to cut costs which may additionally make their compensation go up. It isn't about building a good solid company, it is about getting while the getting is good.

In theory, yes, they could protect their workers' job security with a stock offering.

They are incentivised to protect the interests of their shareholders.

Unions are set up to (N/A in USA) protect the workers.

Agreed, but then it seems to me that the buybacks are kind of besides the point, and the real underlying issue is that they don't care about their workers (and/or aren't incentivized to), no? In terms of future flexibility / robustness to unforeseen emergencies, sitting on a big pile of your own stock doesn't seem that different to me from sitting on a big pile of cash, except in terms of the risk profile. (In contrast to paying a dividend, where they really can't recoup the cash if they need it.) I could easily be missing something though...

They’re not ‘sitting on’ a pile of stock; it gets bought back and cancelled. A company can issue more stock any time it likes, so in that sense every company is ‘sitting on’ an infinite pile of its own stock all the time.

A company doesn't have to destroy the shares they buy back, they can opt to retain them and use them for employee compensation or later reoffer them.

Ah, thank you. I didn't understand that and now this all makes a bit more sense to me.

> that they don't care about their workers (and/or aren't incentivized to), no?

It is generally assumed that decision makers will care more about their own wealth than other people’s wealth.

Right, I'm just trying to understand the notion that stock buybacks are somehow particularly bad in this regard.

The easiest way to do so might be a choice dividend: cash or stock.

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