[bern4444]

It's like a tax free dividend. Dividends are taxable but if a company uses the cash they would have spent on a dividend on a buy back there's no taxable event for the investors. Those investors who want the cash can sell and pay the tax and the rest enjoy the higher share price

[musicale]

Incentivizing short-term investors to dump stock by boosting the price temporarily? I guess that's a strategy.

[Kirby64]

In a purely rational market, buying back shares doesn't boost stock price temporarily... it boosts it forever. You buy back shares and 'retire' them, thereby making everyone else's shares more valuable.

Now, if you're using debt to finance share buy backs, then yeah... it's a short term ploy. But most companies don't use buy backs this way.

[kd5bjo]

> You buy back shares and 'retire' them, thereby making everyone else's shares more valuable.

But the cash outflow to purchase those shares makes the company less valuable at the same time. In a completely efficient market, the amount of money that the company pays to buy back a share should be exactly balanced by the ownership percentage of that share, resulting in no net change to the price of the company's other shares.

[mattclarkdotnet]

Yes but as a shareholder I get an untaxed unrealised capital gain instead of a taxable dividend. I’m not a fan of taxing unrealised capital gains but this particular loophole could do with closing

[victorbjorklund]

But the tax will be paid when the stock is sold. It is more like letting the investor choose when to realise the gain and trigger the tax vs dividend that will happen regardless of wether the investor needs the money at that time or not.

[conception]

Or the stock is used as collateral for a tax free loan and never sold. Tax loophole engaged!

[ac29]

> Yes but as a shareholder I get an untaxed unrealised capital gain instead of a taxable dividend

In the US, stock buybacks are taxed. But, its a fairly negligible amount (1%).

[triceratops]

To close the loophole, ban buybacks. Or at least severely restrict them in some way. If a company wants to return profits let them issue dividends.