Does anyone have a market theory justification that makes them comfortable with the idea?
The company then has essentially two choices on how to return that money. It can pay dividends, which are taxed, or it can do stock buybacks, which are not taxed until investors choose to transact their holdings. Financially, for most investors, buybacks are better.
I'll also point out that buybacks don't obfuscate prices, but instead permanently change them. By reducing the equity outstanding, the equity remaining gets more valuable.
So if someone had 500 shares the split took then to 515. Then the buyback bought 15 of those shares. Net result: the person had 500 shares, just like before, plus some money from the company.
The idea was that this would be capital gains income to the shareholders rather than ordinary income.
The IRS was not amused. I don't remember the name of the company of if they got away with it, but the result was an addition to the tax code to make sure it would not work in the future. Then some buybacks that clearly were legitimate got classified as dividends under the new rules, so the rules were modified again so that those would be OK. I think there may have been another round or two of tweaks for more edge cases.
Money spent on innovation is returned to the market efficiently, and ratchets science and technology forward across the marketplace.
Other countries have fixed this by allowing dividends to be tax free.
I would much prefer having reliable dividend pay outs that stock buy backs.
Tilting the tax code against us is tilting it against the people and for politicians, unchecked bureaucrats with their uncontrollable spending thirst.
That leaves out, based on figures I've seen, roughly half of America's population.
Get out of your bubble.
Those stocks reliably pay out a dividend every month and is very much in he reach of the working poor.
I make more monthly income out of my UK pension than I do from stock buy backs.
This is how the stock market used to work in America before the 80s.
B.S. Last time I checked, accounts at most online brokers were free. And they even allowed purchase of fractional share - so you could start investing with 100 bucks. As long as you do save that $100 and not throw it all away on crap, of course.
There are inequalities, of course, (like Europeans falling behind) but the Americans are doing very well indeed. So please stop with your propaganda.
https://awealthofcommonsense.com/2023/10/americans-have-neve...
Americans have that disposable $100. Now they may very well be deciding to throw it away on cigarettes, alcohol, weed, various entertainment (tv) or all sorts of crap - but that is a whole other discussion altogether.
A large component of senior employees' salary at tech companies tends to be stock awards, which requires somebody to buy up the "free" stock to be usable as cash. If the company itself is doing this, then it amounts to a really roundabout way of paying employees. I'm still not comfortable with this idea, but it did change my attitude from "this is an outrageous practice" to "our tax laws are fucking broken."
Those sellers are already going to be paying taxes no matter who they sold to, and then they’re out of the market. So if the stock price goes up, only the people who held would gain any value from it.
And I would argue that those who hold didn't actually gain any value from it, unless the stock price was lower than it should've been at the time of the buy back.