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U.S. airlines want a $50B bailout. They spent $45B buying back their stock

stamfordadvocate.com

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Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#7

Post by bigmanwalter »

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Executive compensation is tied to stock prices. By buying back stock, they are increasing demand and decreasing available supply of their stock. This results in the stock price rising, along with executive compensation going up as well.

By allowing stock buybacks, we are directly incentivizing this perverse behaviour.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#8

Post by brockwhittaker »

dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash?

1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage.

2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk.

3. Buy back your own stock, which gives back to shareholders.

I'm not saying it was the best thing companies could have done with their money, but there aren't a ton of amazing ways to deploy billions of dollars in cash unless you're expanding operations outside your area of core competency.

I think that lots of people here are creating a lot of revisionist history right now. Almost nobody had any problem with share buybacks for the past five to ten years. The biggest note was that it would increase stock price over time due to the lower availability of shares and higher earnings per share, but hardly the critique most people have these days.

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#9

Post by markharper »

brockwhittaker wrote: post #8
dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

There's also option 4:

- Increase worker pay and benefits

Re: U.S. airlines want a $50B bailout. They spent $45B buying back their stock

#10

Post by ceejayoz »

brockwhittaker wrote: post #8
dominotw wrote: post #3

is there an explanation for stock buybacks that isn't ' evil stockholders'? edit: this was an actual question not a rhetorical one. curious why the downvotes?

Sure — what are your other options if you have lots of cash? 1. Keep it in cash and get sub-inflationary levels on it, and perform poorly due to your lack of leverage. 2. Invest it in other market securities, effectively running some hedge fund. Not a great idea, distracting from your core biz, and shareholders may not appreciate the exposure to outside risk. 3. Buy back your own stock, which gives back to shareholde…

"Keep it in cash" isn't looking like such a bad idea right now.
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