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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?
Earlier quoted context omitted.
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
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?
Airlines exist in a space with ample competition, limited differentiation, and high price-sensitivity for customers. When that happens, they live or die on number of passengers and valuation compared to competitors. It's hard to increase demand for flights past what is already available. So they pump their numbers for the short term because that's what everyone else is doing, and because the cost of saving money for a rainy day means spooking investors or ceding more passengers to a competitor.
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…
Am not an apologist by any stretch, but the narrative is "they should have created a black swan fund instead of share buybacks". But they'd have been skewered for years by the trade press for keeping billions of dollars in sub-optimal immediate cash form in order to buy a little extra time.
I really hate that this argument keeps popping up. There's plenty of reasons to hate bailouts or airlines or anything else, but who the hell could have predicted the world was going to shut down like this in 2015-2019? We were in one of the biggest bull markets in the history of the United States, business was good, and the companies used some of that money to buy back stock. People make it sound like they were buyin…
If our corporate overlords bet everything on short term gain, and left nothing for the tomorrow that they thought would never come, why should we have to fix their mistake?
Earlier quoted context omitted.
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…
4. Pay a dividend
Just remember that the Federal government ended up making money on the automaker and bailouts (quite apart from all the jobs that were saved).
Can you elaborate more? I'm curious on this.
I would need to look it up, but IIRC overall the feds made money on the bailout, especially to the banks, but took a slight haircut on the money they lent to automakers. Of course, that haircut doesn't factor in the benefit in keeping those industries alive and keeping those people employed (IMO very worth the price), but that's a bigger question.
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…
5. Invest it in research
6. Buy other companies to extend your core biz.
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?
I own Google stock. They don't have a dividend at all and buyback massive amounts of stock. It is just efficient. If the government taxed buybacks then they would likely start giving a dividend, as people would prefer deciding what to do with the money.
One additional issue is that company's have chosen often times to do stock buybacks even when taking on debt. This is because they can borrow money cheaply and believe the buybacks are good for the value of the shareholders overall. This isn't necessarily a bad thing for anyone - but in times like this it puts a real stress on them that may even bankrupt them.
I think it is a bit of question of risk. In theory I'd like the company's I own to be prepared for an emergency, but I' also be annoyed if I invested in a company and they just let the money sit in a bank account for years instead of finding a way to return profits to the shareholders immediately.