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[deleted] t1_ja5wa2b wrote

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jdmulloy t1_ja6h9mh wrote

They also don't want to dilute stock that's used for compensation. It's also an alternative to giving dividends where they don't have to be concerned that investors will expect the same or higher dividends in the future. There's also a tax advantage for some investors in getting returns in appreciation instead of dividends, because unrealized gains aren't taxed, but dividends are. They can avoid taxes via charitable donations and margin loans.

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NOT_MartinShkreli t1_ja7jzhb wrote

Bingo. The upper management is unloading their bags on retail and their own company before it goes to shit.

Think of it like bidding on your own eBay item to drive up the price so you can get out at the max price possible …. (Which doesn’t fly on eBay but in the US stock market, play ball…)

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chinawcswing t1_ja6lbtv wrote

Why are you /r/antiwork types so opposed to stock buybacks, but not opposed at all to dividends?

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[deleted] t1_ja7i0qj wrote

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chinawcswing t1_ja96wta wrote

It's not a fact though, it is wrong.

There is nothing different about a stock buyback and a dividend payout. Both exist to return excess cash to shareholders.

Companies are not doing stock buybacks to "enrich CEOs". They do them for the same reason they do dividends, which is to enrich shareholders. Rather they are returning excess cash to shareholders, and shareholders turn around and invest that cash into other companies who can invest it more profitably.

Yes, CEOs often are big shareholders. But they in almost all cases are not the majority shareholder.

The reason companies prefer stock buybacks compared to dividends is that it is more tax efficient.

That is why Biden and the /r/antiwork crowd complain about stock buybacks, but not dividend payments. The government gets a larger chunk from dividend payments, compared to stock buy backs.

Even if your theory that stock buybacks exist to enrich the CEO were correct, what do you think companies would do in the absence of such a mechanism? First off they would do a dividend. If you banned that too, they would just ... increase the salary of the CEO.

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