[Rathseg]

3 more reasons why buybacks are bad:

1. There have been a studies that show companies are very good at doing buybacks near market highs rather than market lows so they are not efficient use of capital. Note that there have also been studies that try to claim stock buybacks do deliver long term value, but I have not found them convincing.

2. To build on the price bump point, the biggest beneficiary is actually short term activist investors and traders(who conveniently have similar time horizons as the executives) rather than long term shareholders.

3. Frequently buybacks are funded by draining reserves and/or with debt(especially when interest rates were low), this leaves companies weak when economic shocks happen like when the pandemic hit and we had to bail out the airlines who had no cash because they had been spending all their spare cash on buybacks. This could happen with dividends too but it is harder because it is an ongoing 'expense' you have to plan for because you pay it out every quarter rather than allow large sudden expenditures like you have with buybacks.

https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for...