[ClumsyPilot]

> Recently we have seen profitable companies drop workers for no reason other than to appease activist investors. Now sure, this is their prerogative

I blame stock buybacks. Reminder that theyy were illegal untill recently.

And they perform no legitimate function other than being unregulated, tax-evading dividends.

> But in the United States, capital expenditures aren’t accelerating. Instead, new cash is being used to reduce the number of equities available, thus artificially driving up their value. That practice has been exploding. It’s an irresistible temptation, partly because everyone is doing it. Nobody wants to be left out. And the cash is just sitting there, idle, because it’s a rare C suite that has continued to invest in new, creative growth rather than pick the low-hanging fruit of easy money to be made through financial maneuvers. It was a good thing that companies receiving stimulus money to stay in operation during the Covid-19 shutdown have been banned from using it for stock buybacks. But it’s too little too late.

[aketchum]

their entire function is to serve as a "tax-evading dividend". I fail to see why there is a difference besides on tax revenue for a buyback vs a dividend. Can you expand on why they are so bad? Would you be equally unhappy if an equal amount was spent as a dividend instead of buyback?

[ClumsyPilot]

Dividends can only be paid from profits, that have already been taxed.

Stock buysbacks can be leveraged, can be financed with debt and you could use them to raid the company.

They also have different effect on stock price - you pay out dividends, and then market reacts. A human being decides if now your company is more valuable.

When you buyback stock, the effect is purely mechanical - sell orders are closed, and the more expensive sell orders now sell the price - price goes up in milliseconds, without any human decisionmaking.

If you paid 1 billion in dividends, it will not raise price as much as spending 1 billion on shate buybacks.