Share buybacks -yes or no ?

[Tommy Tainant]

My heart sinks when compamies I invest in do this.I rarely see the benefit in real terms..

Any reduction in the share capital has negligable effect on the share price or the dividend and it seems to be the act of a management that has run out of ideas.

I would prefer the cash and a new board of directors.

Do buybacks work for you ?

 

[Meister]

It doesn't hurt the stock you own. In fact, I would think that it's to your advantage.

 

[Manonthestreet]

It doesn't hurt the stock you own. In fact, I would think that it's to your advantage.

I own Shell ....this is all they do and the price of their stock is about the same as when I bought it. Yes they made record profits this yr......

 

[Zincwarrior]

My heart sinks when compamies I invest in do this.I rarely see the benefit in real terms..

Any reduction in the share capital has negligable effect on the share price or the dividend and it seems to be the act of a management that has run out of ideas.

I would prefer the cash and a new board of directors.

Do buybacks work for you ?

Both are methods of returning cash to shareholders. The issue with an increase in dividends, is that dividends are viewed as steady annuity payments. Fluctuations in the annuity payment can create havoc in the stock price. This is why firms are loath to cut a dividend.

Stock buybacks are nonrecurring, avoiding that issue. It reduces the shares outstanding, and generally raises the stock price.

 

[Tommy Tainant]

It doesn't hurt the stock you own. In fact, I would think that it's to your advantage.

I know. It just never feels like that.

 

[Tommy Tainant]

Both are methods of returning cash to shareholders. The issue with an increase in dividends, is that dividends are viewed as steady annuity payments. Fluctuations in the annuity payment can create havoc in the stock price. This is why firms are loath to cut a dividend.

Stock buybacks are nonrecurring, avoiding that issue. It reduces the shares outstanding, and generally raises the stock price.

The share price rise can be wiped out by market sentiment the same day. They could pay down debt. That would have a longer term benefit.
The benefits from buy backs are only really .applicable to the giant shareholders and they call the shots.

I have shares in Games workshop. They return all surplus cash as a policy.. The divi is erratic but they arent an income share.

 

[Zincwarrior]

The share price rise can be wiped out by market sentiment the same day. They could pay down debt. That would have a longer term benefit.
The benefits from buy backs are only really .applicable to the giant shareholders and they call the shots.

I have shares in Games workshop. They return all surplus cash as a policy.. The divi is erratic but they arent an income share.

GamesWorkshop is not a top 1000 company. Those companies generally are targetted by persons desiring stable annuity income. GW is not that. This is fine but thats not the market they play in.

Also Zinc Within! Zinc Without! Nothing says love like a vortex grenade down the throat. And when did Marines suddenly get superheavies? Thats IG/AM kit.

 

[Winston]

it seems to be the act of a management that has run out of ideas.

Kudos, you hit the nail on the head. When a company buys back their stock they are saying, "Sorry, we don't have any acceptable capital investments for our profits, so we are throwing that money back to you, the shareholder." WTF? Why did you invest in the company to start with? It is a punt, plain and simple. And I got to tell you, if you bet on a team that punts after three downs time and time again you are going to go broke.

But there are a lot of things in play here. First, it used to be illegal for companies to buy back stock. It was considered price manipulation and it was specifically banned. Ronald Reagan changed that. Second, accounting firms used to be liable for the misstatement of earnings from companies. They approve the earnings statement of a company, and it turns out wrong, the accounting firm was responsible for the loss of capitalization. Reagan changed that too.

Then we come to executive compensation, at that is on Clinton. First, he reduced the capital gains rate, but second, he no longer required companies to account for stock options used in executive compensation. If the CEO takes office and the stock is 20 bucks a share, and he gets an option at that price, when the stock reaches 40 bucks he can sell. First, he pays capital gains tax, not income tax, on that gain. But second, and most importantly, the company, which pays the difference, doesn't have to record that liability on the balance sheet. Like, WTF?

One of my favorite stories, and I know I have provided them before. Business school, advanced Finance class, professor asks, what should be a company's primary goal. I jump all over it, I proclaim, "maximize contribution". The professor was like, "wrong". I was puzzled. Then some snot nosed little shit goes, "maximize share price", and the professor was like "correct". I flipped the fawk out. I was coming unglued. The professor recognized me and I just let it out, "You mean what is important is how much the people think a company is going to make as opposed to how much a company actually made?" And he was like, "Yeah, that is exactly it". I retorted, "Well, I just wasted 14 grand".

The solution is really simple. Stock buybacks, banned. Capital gains, taxed as ordinary income. Accounting firms, on the hook for mis-stated earnings, 100%. Stock options, a real liability that must be on the balance sheet. All that makes sense. Common sense.

 

[luiza]

I know. It just never feels like that.

Is there anything that you can talk knowledgeably about ? Study yourself and try throwbacks rather than buybacks .

Also , please provide English translations to your Welsh scribble .

Compamies ?? What are they?
Negligable ? What is that?

 

[Toddsterpatriot]

My heart sinks when compamies I invest in do this.I rarely see the benefit in real terms..

Any reduction in the share capital has negligable effect on the share price or the dividend and it seems to be the act of a management that has run out of ideas.

I would prefer the cash and a new board of directors.

Do buybacks work for you ?

I rarely see the benefit in real terms..

Then don't sell your shares to the company.

I would prefer the cash and a new board of directors.

Then sell your shares. But if you do, you get no say on the board.

 

[Toddsterpatriot]

Kudos, you hit the nail on the head. When a company buys back their stock they are saying, "Sorry, we don't have any acceptable capital investments for our profits, so we are throwing that money back to you, the shareholder." WTF? Why did you invest in the company to start with? It is a punt, plain and simple. And I got to tell you, if you bet on a team that punts after three downs time and time again you are going to go broke.

But there are a lot of things in play here. First, it used to be illegal for companies to buy back stock. It was considered price manipulation and it was specifically banned. Ronald Reagan changed that. Second, accounting firms used to be liable for the misstatement of earnings from companies. They approve the earnings statement of a company, and it turns out wrong, the accounting firm was responsible for the loss of capitalization. Reagan changed that too.

Then we come to executive compensation, at that is on Clinton. First, he reduced the capital gains rate, but second, he no longer required companies to account for stock options used in executive compensation. If the CEO takes office and the stock is 20 bucks a share, and he gets an option at that price, when the stock reaches 40 bucks he can sell. First, he pays capital gains tax, not income tax, on that gain. But second, and most importantly, the company, which pays the difference, doesn't have to record that liability on the balance sheet. Like, WTF?

One of my favorite stories, and I know I have provided them before. Business school, advanced Finance class, professor asks, what should be a company's primary goal. I jump all over it, I proclaim, "maximize contribution". The professor was like, "wrong". I was puzzled. Then some snot nosed little shit goes, "maximize share price", and the professor was like "correct". I flipped the fawk out. I was coming unglued. The professor recognized me and I just let it out, "You mean what is important is how much the people think a company is going to make as opposed to how much a company actually made?" And he was like, "Yeah, that is exactly it". I retorted, "Well, I just wasted 14 grand".

The solution is really simple. Stock buybacks, banned. Capital gains, taxed as ordinary income. Accounting firms, on the hook for mis-stated earnings, 100%. Stock options, a real liability that must be on the balance sheet. All that makes sense. Common sense.

When a company buys back their stock they are saying, "Sorry, we don't have any acceptable capital investments for our profits, so we are throwing that money back to you, the shareholder."

That's awful! Even if the timing is bad or they have no good ideas, they should just spend all that money on something. What could go wrong?

First, it used to be illegal for companies to buy back stock. It was considered price manipulation and it was specifically banned.

As long as they aren't buying and selling their stock short-term, it's not manipulation.
It was a stupid ban.

But second, and most importantly, the company, which pays the difference, doesn't have to record that liability on the balance sheet. Like, WTF?

What liability? What difference do you feel they are paying? Who are they paying it to?

 

[Tommy Tainant]

GamesWorkshop is not a top 1000 company. Those companies generally are targetted by persons desiring stable annuity income. GW is not that. This is fine but thats not the market they play in.

Also Zinc Within! Zinc Without! Nothing says love like a vortex grenade down the throat. And when did Marines suddenly get superheavies? Thats IG/AM kit.

Oh dear, is this a warhammer thing ? I know nothing about the products except they re very popular and seem recession proof.

 

[Tommy Tainant]

Kudos, you hit the nail on the head. When a company buys back their stock they are saying, "Sorry, we don't have any acceptable capital investments for our profits, so we are throwing that money back to you, the shareholder." WTF? Why did you invest in the company to start with? It is a punt, plain and simple. And I got to tell you, if you bet on a team that punts after three downs time and time again you are going to go broke.

But there are a lot of things in play here. First, it used to be illegal for companies to buy back stock. It was considered price manipulation and it was specifically banned. Ronald Reagan changed that. Second, accounting firms used to be liable for the misstatement of earnings from companies. They approve the earnings statement of a company, and it turns out wrong, the accounting firm was responsible for the loss of capitalization. Reagan changed that too.

Then we come to executive compensation, at that is on Clinton. First, he reduced the capital gains rate, but second, he no longer required companies to account for stock options used in executive compensation. If the CEO takes office and the stock is 20 bucks a share, and he gets an option at that price, when the stock reaches 40 bucks he can sell. First, he pays capital gains tax, not income tax, on that gain. But second, and most importantly, the company, which pays the difference, doesn't have to record that liability on the balance sheet. Like, WTF?

One of my favorite stories, and I know I have provided them before. Business school, advanced Finance class, professor asks, what should be a company's primary goal. I jump all over it, I proclaim, "maximize contribution". The professor was like, "wrong". I was puzzled. Then some snot nosed little shit goes, "maximize share price", and the professor was like "correct". I flipped the fawk out. I was coming unglued. The professor recognized me and I just let it out, "You mean what is important is how much the people think a company is going to make as opposed to how much a company actually made?" And he was like, "Yeah, that is exactly it". I retorted, "Well, I just wasted 14 grand".

The solution is really simple. Stock buybacks, banned. Capital gains, taxed as ordinary income. Accounting firms, on the hook for mis-stated earnings, 100%. Stock options, a real liability that must be on the balance sheet. All that makes sense. Common sense.

Too many companies are short teermist because exec pay is linked to short term goals.
Sale and leaseback of property is another short term fix that worries me. It is short term mot long term.

 

[Tommy Tainant]

I rarely see the benefit in real terms..

Then don't sell your shares to the company.

I would prefer the cash and a new board of directors.

Then sell your shares. But if you do, you get no say on the board.

Thanks. I didnt realise I could sell the shares.

 

[Zincwarrior]

Oh dear, is this a warhammer thing ? I know nothing about the products except they re very popular and seem recession proof.

I am sad!

 

[Tommy Tainant]

I am sad!

Are you one of those nerdy kids with a pony tail ?

 

[Likkmee]

Are you one of those nerdy kids with a pony tail ?

Is is... a 69 11/12 old kiddie

 

[Orangecat]

My heart sinks when compamies I invest in do this.I rarely see the benefit in real terms..

Grinder is buying back shares?

 

[Toddsterpatriot]

Thanks. I didnt realise I could sell the shares.

It's obvious you aren't very bright.

You do have the whining down.

 

[Polishprince]

Buying back shares is a company investing in themselves. Depending on the interest rates being paid, sure, paying down debt can be advantageous as well.

But particularly in dying industries like Petroleum, its sort of pointless to spend money to expand production.