What is the difference between a stock buy back and a dividend? Both increase shareholder value by returning cash to investors. If not share buy backs, they would just issue a special dividend to accomplish essentially the same thing just without reducing the outstanding share count.
If companies have the ability to issue new shares, why shouldn't they have the ability to reduce the shares with a buy back? What is the negative consequence?
Further, if a company is flush with cash but the stock price is too low, is there any reason they shouldn't be allowed to buy it back to tell the market that they're wrong?
I don't know, I'm not convinced yet, buybacks just seems like a fast way to increase price/"returns on investment in the stock" and market cap and appease investors with large holdings. Surely, yes, you could take loans out against the new market cap or issue debt, but why not just have used the existing cash to do that already. The only explanation could be that investors can cash out and different taxes have affect (or not!) and innovation is less of a need than continuing to exist and buy back stocks.
We have a spending problem in this country, not a lack of tax money.
Yeah. People seem to think if a company didn't do a buyback they would spend the money on salaries or R&D. No, the company would issue a dividend instead. One consequence of a dividend is they typically trigger a taxable event vs. a buyback which gives the investor more options to control their tax burden. Personally, I prefer buybacks over dividends in stocks I own for this reason.
The recent movement against stock buybacks in the US makes US stocks much less attractive to foreign investors like me. Aside from the tax thing, I don’t see what’s the practical difference between buybacks and dividend either (besides potentially a difference in opinion of the company’s view on the stock price) , but apparently some people are outraged at one but not the other.
A dividend payout is cash in your hand, a share buyback is theoretical gains that may be gone by the time you sell.
Get someone from management on their good side with planted leaks, then drop something like “wow, management is talking about how absurd this comparison is, I mean look!!1!! this is absurd” to them. Bam you have yourself a stew of PR.
Buybacks were justified by a whole lot of things that simply are outright lies. Take away the tax benefit and you'd see them go away overnight.