> For most of the 20th century, stock buybacks were deemed illegal because they were thought to be a form of stock market manipulation.
https://www.forbes.com/sites/aalsin/2017/02/28/shareholders-...
Henry Singleton who founded Teledyne is known as the buyback king because he used his high-flying stock in the 1960s to snap up tons of smaller electronics companies, and when his stock crashed to $8 during the years of stagflation, snapped up millions with buybacks. In the end, he had used his stock as a currency to acquire dozens of companies at what essentially became 80% discounts.
http://csinvesting.org/wp-content/uploads/2015/05/Dr.-Single...
A very good very in-depth PDF read about him if you're interested in this type of thing.
…that’s what a share of stock is.
Sure, bids hitting the orderbook theoretically keeps a stock price higher than the counterfactual where the bids did not exist, but it's simply urban myth that failing companies can keep their stock price high over the long term with buybacks. The math doesn't pencil out.
QED: manipulation
> failing companies can keep their stock price high over the long term with buybacks
This assumes they care about the long term.
Maybe executives shouldn't have stock. Then it wouldn't be manipulation.
But they do. That is their main compensation people like to point (the CEO isn't really getting paid those millions, it's stocks). So the CEO is paid in a way that encourage the CEO to commit DIRECT stock manipulation.
which just formalized ways that the SEC was finding corporations not guilty and transparent enough, this blueprint paved the way for corporations to all copy it as well as reducing the administrative overheard of caring at all
the exceptions make the rule
If you think returning money to investors is bad, I have to ask: Why would anyone invest in the first place?
What does that phrase even mean? It's nonsensical. Whether via buybacks or dividends, money goes from the corporation to its investors. That's why investors invest.
If my option is a 5% dividend or a 5% share buy-back, the net-of-taxes benefit of the 5% dividend is 15%-20% less due to capital gains taxes than the share buy-back. The effect with annual compounding over many years is quite material...