Submitted by lilly_kilgore t3_10phz45 in explainlikeimfive
A_Garbage_Truck t1_j6kjgg8 wrote
is it frowned upon?
its not a good look normally but its something they can do and its generally fine.
buying back stock means the company is trying to consolidate it(in order to be able to get out of being publicy listed, they have to buy back all of the stock they opened ot the public)
lilly_kilgore OP t1_j6kkh3p wrote
I guess I don't know if it's frowned upon but every time I see it mentioned it's never in a favorable light. Like "Company XYZ made record profits and spent x billions on stock buy backs" etc. I'm just trying to understand what that means and what the significance is.
MisterMarcus t1_j6kqep3 wrote
The main argument against it seems to be that companies should be doing something else with that money, such as paying their employees more, investing in better/safer/more efficient equipment or technology to make their workers' lives easier, etc. Rather than simply putting it in their own pockets as profit.
So the negativity is mostly from people like unions, who want better pay and conditions for their workers, or certain elements of the "people before profits!" strain of the political Left
Pippin1505 t1_j6kpxj8 wrote
Buying back stock and paying dividends are *exactly* the same thing: giving back cash to shareholders.
Depending on countries tax laws, one is more financially attractive (if dividends are more or less taxed than capital gains etc).
The headlines would be the same : Company is making record profits and paying dividends (instead of increasing salaries, I assume?)
High dividends / Stock buy back may make financial analysts raise an eyebrow because the company is essentially saying :
"I have no worthwhile investment to spend this on, I'll give it back to shareholders"
cookerg t1_j6ku89n wrote
If one or the other is better in different circumstances, then they are not *exactly the same*
Any-Growth8158 t1_j6kny2l wrote
It is highly frowned upon by the left, and the media is predominantly leftist, so when they report on stock buy backs it is almost always in an unfavorable light since the left is anti-capitalistic.
I'm agnostic with regards to buy backs--I don't know if they are necessarily good or bad, but I disagree with the government trying to control things. This is the company's money so they can do with it what they will. The left says that this is unfair since they're given tax breaks and loans and such. I'm more than happy with the government not picking winners and losers by not providing the companies with these sources of cash.
FoldableHuman t1_j6ks26a wrote
> and the media is predominantly leftist
lol
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