Chef Mickey
Well-Known Member
I’ve been over this with you before, but this is an inaccurate and jaded representation of buybacks.Stock Buybacks USED to be illegal because of the moral hazard, They serve to inflate EPS and as such are too frequently as a tool to boost compensation for senior leadership, I suggest you read the following article from the Harvard Business Review,
https://hbr.org/2014/09/profits-without-prosperity
https://www.forbes.com/sites/aalsin...uired-to-vote-on-stock-buybacks/#279d3c96b1ef
If one REALLY wanted to return capital directly to investors one could declare a special dividend, But that would not inflate EPS and create 'paper wealth'.
The rule by which the SEC made share buybacks legal after being illegal for most of the stock market's history is 10b-18 adopted in 1982.
Buybacks create real value by permanently retiring shares which make remaining shares by definition more scarce and valuable, save taxes for investors, reduce dividend costs, and increase EPS in a completely legitimate way.
Buybacks make sense at one price and don’t make sense at another. You’re entirely focused on the latter. Warren Buffett, the king, approves of buying back shares and if its good enough for him, its good enough for me.
There are countless means of inflating executive pay; buybacks certainly aren’t at the top of th list. In fact, more common, are issuance of new shares to top execs which has the OPPOSITE effect of buybacks by decreasing shareholder value by increasing share count and diluting your shares.
Last edited: