BYE-BYE BUYBACKS Why is everyone talking about buybacks? Yesterday, China’s JD.com made news when it announced it would buy back $2B in stocks. This past weekend, a consortium of 8 big banks -- including Goldman Sachs and Bank of America --teamed up to halt stock buybacks at their own companies. And recently the airline industry has faced huge criticism -- even as it falls out of the sky -- for investing big bucks in big buybacks over the past decade. So... why’s everyone bickering over buybacks? They’re a good deal for investors When cash-rich companies repurchase their own shares, the supply of outstanding shares shrinks -- increasing stock values for existing investors. Many of the world’s richest companies are known for their big buyback programs: Apple recently spent $234.7B over a 5-year period buying back its shares. But buybacks can be a bad deal Since buybacks still cost companies real cash, some critics argue that buybacks aren’t worth it because they merely manipulate stock prices without adding any real value for the company’s customers Apple’s buyback budget, for example, was $234.7B the company didn’t spend improving its products or driving down costs for customers. And the corona-chaos is highlighting Big Buyback issues In the last decade, the biggest US airlines spent 96% of their free cash flow on stock buybacks. A big focus on buybacks helped American Airlines increase its profits from >$250m in 2006 to $7.6B in 2015. With the airline industry on the brink of a bailout, some observers point to the buybacks as one reason why American is now $30B of debt (~5x the company’s valuation). Even Goldman Sachs and the other 7 members of the Financial Services Forum agree, saying halting buybacks “is consistent with our collective objective to use our significant capital and liquidity to provide maximum support to individuals, small businesses, and the broader economy.” from Hustle
It doesn't take genius-level thinking to understand that buybacks are wonderful when the market is surging, and the buybacks are goosing C-suite compensation and shareholder profits. But when the thing you've just bought - namely your own stock - is now in the dumper, you realize that you just pissed away your cash. Now, this is not an issue for most taxpayers. That is, until a company like an airline comes begging at the public trough for a billion dollar handout, after aggressively engaging earlier in the said pissing away of their profits, and screwing the traveling public with excess fees, cramped seating and shitty service. My opinion is to let the assholes go broke. Cut the wings off the planes and turn them into railroad cars.
How about SEIZING said corporate thieves' houses, stocks, and other assets?? Do that to 200-300 of them fuckers and this robbing of the taxpayers will stop!!!
The complaining about buybacks is pretty much garbage - with the exception of the fairness/agency problem argument, i.e. that it allows corporate executives to boost their own comp, creating an incentive to buy back shares even when better long-term uses of the capital are available. How on earth does it benefit you, as a shareholder, to have massive amounts of idle cash sitting around on the balance sheets of the companies you own? How does it makes sense for companies to have tons of capital sitting around at an implied CoC of 4-6%, earning 0-1% on cash? Would there be so much noise about it if they'd paid dividends instead? Dividends are economically identical to buybacks, but shareholders have to pay taxes on dividends but not on buybacks. How does it benefit shareholders to pay more taxes for no benefit whatsoever?
There it goes. That was all the bread and butter of the stock gains. Like I said no bull market for many many years!!!
Boeing blew through all it's cash over the last few years spending enough money to have helped remain solvent. No Buybacks like Mark Cuban outlined on CNBC is logical.
Why would it take mark Cuban to say that in order for it to get through anyone's thick fucking head. Of course no more stock buybacks
Thieves. Send them to Guilotone. All of them are crony capitalists. https://slate.com/business/2020/03/airlines-bailout-coronavirus.html The first question—where’s the money?—is also not so complicated. Over the past decade, according to Bloomberg, U.S. airlines spent 96 percent of their cash profits on stock buybacks to enrich investors and their own executives, whose positions often come with stock holdings.*
Once the panic and anger is gone all the potential restrictions usually get lifted like they always do. Political leaders like the Clintons, Obamas, Newt Gingrich, Eric Cantor get paid crazy sums of money by the businesses they helped.
Exactly exactly exactly right...the restrictions slowly go away as the sun shines bright and everything is back to normal ...then everyone forgets and the next crisis we go back to the same rinse and repeat process all over again and again.