Comment by _DeadFred_
7 months ago
It was funny watching the warrior whatever site back in the day when Panda came along. Love when these people get their horrible business models kneecapped.
Now let's make corporate stock manipulation illegal again and ban corporate stock buybacks. Talk about a purely manipulative business strategy.
What's the problem with stock buybacks?
Couple articles that explore that:
https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...
https://www.theatlantic.com/ideas/archive/2018/07/are-stock-...
They are nothing but direct stock manipulation that was 'legalized' at the same time where executive compensation was moved from salary to... stock, so that you end up with a quasi-legal (stock manipulation by executives is supposed to be illegal) corrupt incentives system.
Two things:
-Stock buybacks are not manipulation, they’re simply a way to return cash to shareholders and then the shareholder decides when to incur tax liability. A company is well within its rights to issue additional shares or buy back and destroy shares at their discretion. It’s functionally equivalent to a dividend without a taxable event.
-Corporate boards award stock grants to executives because they want management to be aligned with shareholders. I think executive compensation is excessive, but stock grants do align management and shareholders.
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Nothing directly, it just sounds bad at face value.
'Stock manipulation is cool, especially when you change executives pay structure to be based purely on said manipulation. Totally creates healthy incentives not perverse ones.'
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The company is giving money back to shareholders. What exactly is wrong with that?
It is not. It is manipulating the value of the stock, which the shareholders can possible take advantage of by selling their stock. Giving money back to shareholders is called a dividend. Manipulating the price of a stock is manipulation, not returning money.
What’s the practical difference? Either way the amount that ends up in your brokerage account should increase be the same amount. Stock buybacks are more tax efficient for the stock owner in the US