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0 pointsta86458mo ago0 comments

They can only buy back stocks from people who want to sell them. The people who sell them do so because they believe it's a good deal. The process puts cash in the hands of those sellers, who can then go on to invest in something else, keeping the market more liquid rather than the first company sitting on cash reserves. The price of an individual stock is pretty much meaningless, you must multiply by the total number of stocks outstanding to determine the market cap. So it is not the buying back of stock that represents any fraud.

If there is any fraud, it would be having performance bonuses tied to individual stock price, rather than market cap. But blaming the buyback itself, is short-sighted.

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throwaway20378mo ago

The first paragraph I agree with but not this part:

    > performance bonuses tied to individual stock price

This is pretty common for the board to setup stock price targets for the CEO, then pay large bonuses (cash or shares) for beating the targets.

hopelite8mo ago

You are making a basic mistake. Assuming that the originating company or its interested parties are regular market participants.

They are in effect more like the guys who stand around a cup and ball scam to make it look like there’s action and winners and keys you think you could do better.

A buyback is a removal of the security from the market, not participation in the market.

It’s like people buying their own books to drive up sales in order to get in lists to promote more book sales, which is when they then supply the market with the books their bought once the price has been artificially elevated and has become sticky.

You may not like hearing that and it’s clearly not the mainstream street preferred narrative, but that’s what it is.

ta8645OP8mo ago

I don't find anything you said very convincing. You are simply characterizing a transaction as nefarious, and perhaps conspiratorial. Of course, there are incentives and perhaps even misincentives around such sales, but that doesn't mean they are inherently bad.

There are mechanisms that are commonly employed to REDUCE the price of the stock, (ie. a stock split), and nobody bats an eye about that. Buying back stocks is a reasonable way to employ cash reserves, and protects the firm from exposure to foreign exchange rate, and inflation risks.

I will agree with you that the way executive bonuses are structured can be a perverse incentive that borders on fraud. But blaming the buyback of stocks itself, isn't grounded in any inherent economic misdeed.

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