[idontknowtech]

The argument is that a company like Apple, instead of investing its cash pile itself, should return that money to its shareholders who will, collectively, better allocate their capital than Apple will. This is almost certainly true.

The company then has essentially two choices on how to return that money. It can pay dividends, which are taxed, or it can do stock buybacks, which are not taxed until investors choose to transact their holdings. Financially, for most investors, buybacks are better.

I'll also point out that buybacks don't obfuscate prices, but instead permanently change them. By reducing the equity outstanding, the equity remaining gets more valuable.

[tzs]

There was a company a long time ago that had a clever idea. Instead of doing a dividend they would do a stock split followed by a stock buyback. For example a 1.03 to 1 stock split followed by a buyback of 3/103 of the stock.

So if someone had 500 shares the split took then to 515. Then the buyback bought 15 of those shares. Net result: the person had 500 shares, just like before, plus some money from the company.

The idea was that this would be capital gains income to the shareholders rather than ordinary income.

The IRS was not amused. I don't remember the name of the company of if they got away with it, but the result was an addition to the tax code to make sure it would not work in the future. Then some buybacks that clearly were legitimate got classified as dividends under the new rules, so the rules were modified again so that those would be OK. I think there may have been another round or two of tweaks for more edge cases.

[woopsn]

Apple is unconcerned with the efficient allocation of capital. Hence their shell companies in Ireland.

Money spent on innovation is returned to the market efficiently, and ratchets science and technology forward across the marketplace.