A whole bunch of rich executives hold a lion's share of the stock, but they take only a small compensation of salary.

They get, however, compensation in the form of shares of the company.

The company can produce a ton of profit by doing things like cutting corners and reducing salary, that profit can be reinvested in the company or paid out to the shareholders.

But... If it were paid out to the shareholders, they would have to pay taxes on it.

So the idea is, by using the money to artificially lower the supply of stocks through a buyback, you're increasing the proportional share each stock represents in the company.

If you have 100 stock issued, each one represents 1/100 stake in a company worth 10,000$. Each is worth 100.00$. The owners of the company can use their 1000$ profit to buy back 10 shares. Now there are 90 shares that represent 1/90 stake in the company, meaning you've effectively 'given' each shareholder around 0.11 stock for each share they own.

The issue with this is that you're basically giving people money tax-free. Executives and billionaires don't need to pay capital gains tax until they sell their stock.

Then, they have another trick! They just use it as collateral to secure low-interest loans and live lofty lives of luxury tax-free. A bank will happily 'lend' someone enough money to live an expensive extravagant life in exchange for having those assets as collateral.

So they can accumulate billions of dollars of funds, tax-free, by dodging income tax and instead inflating the value of held stock.

They don't ever need to sell that stock because they can buy anything they want using it as collateral.

So they never have to pay taxes on it.

'Buying back' stock also has unpredictable market effects. If a company is frequently issuing buybacks, people may speculate based on that pattern.

It's a big issue, a big scam, not enough people are talking about it and dissecting what it really means.