This is the same concept as you owning a home and someone builds a nicer home next to you. Your home value just went up. But you don't have a cent of that money until you sell your home, and then you are taxed on the gains (unless you roll it into another home, but that's a separate discussion).
Who do you think they are buying the shares from? It literally directly puts money in the pockets of investors.
The company may stock buy back directly from employee's RSUs, which are taxed as income.
That’s not how this works. Where is this focus on “adding value”? What the hell does that even mean?
Just take this to its logical conclusion: let’s say a company buys back 100% of its shares. In this case they have returned a ton of capital to investors very tax efficiently, and price will converge on whatever price the very last seller is willing to sell at.
Most people selling their shares in a company do not know who is on the buying side, and that is generally the case here. This goes for retail and institutional investors. And the buy-back programs are done slowly to avoid slippage, which can make it even harder to track down in the moment.
Someone who wanted to sell was selling anyway. They don't profit any more than their gains (or losses) already covered. The people who get "value" are the ones who did NOT sell their shares, and their "value" is only realized down the road when they do eventually sell.
I’m not sure what this has to do with anything? Why does it have to be at a premium? What in gods green earth are you on about? What difference does it make if you know or don’t know who the buyer is??
Those who want to sell can sell (buybacks are programmatic) and those who don’t can benefit from appreciation.
> Who do you think they are buying the shares from? It literally directly puts money in the pockets of investors.
He's trying to explain to you why stock buybacks don't "literally directly put money in the pockets of investors". If your shares are sold back to the company as part of the buyback you are 1) no longer an investor obviously, and 2) have not realized any gains as a result of the buyback. Investors who did not sell see their shares appreciate, which is different from "putting money in their pockets"
Well for one, that presupposes that investors sell all of their shares at the same time, which they rarely do. So, I have 100 shares and I sell 10 back to the company. I receive 10 shares worth of cash directly from the company and I still have 90 left thus qualifying me as an investor under your definition.
And secondly, your entire premise is absurd. By your definition, a dividend isn’t a company returning cash to investors because by the time they issue the dividend, it’s no longer their cash, it’s the investors.
You guys just don’t understand this stuff. The real world just doesn’t work the way you imagine it.
Hint: the answer is... no one. Investors who held see the value of their holdings increase, again, different from "cash in your pocket"
The investors who sold the shares to the company. Markets aren’t some magical entity that conjure shares out of thin air.
If a company buys back 10 shares, they buy those 10 shares back from an investor who wants to sell 10 shares. That investor now has cash literally in their pocket.
How do you think this stuff works? Where do you think the money goes when companies spend on buybacks?
This also has nothing to do with returning cash to investors. They were going to sell the stock anyway. Who cares if it keeps going up? It has nothing to do with the mechanics of a buyback.
> These investors who sold did not benefit from the sale any more than they would have selling on the open market in a non-buyback situation.
What in the ever loving Christ? Why does this matter? You guys just keep moving the goal posts. This simply doesn’t matter and I’m not sure why you guys get hung up on it. Shareholders love buybacks. Why does HN think they have figured something out that millions of other people have missed. It gets so tiring going in circles.
Nobody has anything valuable until they transfer some cash to receive that thing. The potential to transfer X for Y is valuable. Not to mention borrowing against one's assets.
That's a bit different, as you generally reap some ongoing benefits from owning a home, such as an income stream (rent) or place to live (savings on rent, which aren't usually taxed), which you don't get from owning stocks (other dividends, which are taxed, and the benefit of voting if they're voting shares).
>"Nobody has anything valuable until they transfer some cash to receive that thing. The potential to transfer X for Y is valuable. Not to mention borrowing against one's assets."
We generally don't tax things that have the potential to increase borrowing power (because of that thing alone); we don't tax high credit scores or educational status/attainment, or changes in either.
It's not 0 tax... it's cap gains (short or long) whenever the shareholder sells.
Or they could commit to just staring at imaginary numbers in a bank account forever I guess, but then you start to ask existential questions about what inequality actually means if nobody ever spends money.
And yes, 401ks are tax-advantaged... that's the point of the account. It would be equivalently tax-advantaged if companies were paying dividends instead of running buybacks.
The value of your stock might go up. That is taxed if you sell if for cash.