Do you think stock buybacks should be legal?

[Anonymous]

They weren't until Reagan.

Updates

1 y

John Deere has laid off roughly 1000 workers so far this year.

But the company reported a profit of over $10 billion in 2023.

Its CEO received $26.7 million in total compensation.

And it spent over $7 billion on stock buybacks.

[patois]

What's the issue? Companies issue stock to raise money from investors. When investors want to exit that investment and the company has the money, they can make the choice to buy back some of that stock they issued. It's like if you wanted a home, so you went and found investors so you could afford to buy that home. A bank offers you a loan at x% but in time you want to make payments to the bank to reduce your debt so you don't have to keep paying interest (dividends). If you keep at it eventually you own your own home/company.

[Asker]

Hello Mr. Post-and-block. The issue is that it's market manipulation.

[patois]

How so? The market is always buying and selling. For every buyer there is a willing seller. Prices go up and down based on demand from the market. Every transaction has some person asking to sell at a specific price and someone has to be willing to purchase at that price for the sale to go through. If investors want to exit an investment, demand has dropped. If the company wants to buy said stock back at the current market value they didn't manipulate anything, they purchased stock at the going rate. If demand latter increases that's not a result of the company. That is the result of purchase orders from other people in the market.

[Asker]

"By using inside knowledge of when and how buybacks are scheduled, corporate executives can time when they exercise their own stock options — which now constitute most of their compensation — to reap maximum benefits for themselves.

Every dollar spent lining the pockets of CEOs and investors is a dollar less to upgrade equipment and protect workers and the public.

Boeing failed to follow through with a promised $7 billion safety redesign of its 737 aircraft while it was spending roughly that much each year on stock buybacks."
robertreich.substack.com/.../stock-buybacks-are-lethal-literally

[patois]

The only thing that has occur is that supply of shares in the market has been reduced and revenue from the company that would typically be paid out as a dividend to share holders has been spent on stock buy backs. This makes the dividend payout for current stock holders less desirable which in turn makes the stock less desirable to hold. That said if no one is willing to sell, they can't buy stock back. They could however invest in real estate, infrastructure, capital goods, inventory, etc. to avoid paying dividend either way.

[patois]

There is a difference between a "stock buyback" and "insider trading". Insider trading is already illegal. You should learn the difference. Now you know why you got blocked. You're stupid.

[Asker]

What is the difference? How can a CEO not know what's happening in their company?

[patois]

CEOs have a fiduciary responsibility to act in the interest of their organization, not in their own interest. They can't use private information for personal gain. Thus trading on that private information before it is public knowledge is illegal. This is why buybacks are always publicly announced. Once they are announced, it is no longer private information what the company intends to do and everyone in the market has equal opportunity based on that information. The reason why this tends to drive prices higher so that CEOs can liquidate personal shares for profit as you put it in much worse framing, is because speculators outside of the company know there is new demand for the stock from the company itself, therefore investors outside the company attempt to buy more stock anticipating a price hike so that they can profit off of the guaranteed demand. Everyone knows the company will be repurchasing a specific amount of share from the market, so people rush to buy it and then flip it. Board members often liquidate some of their holdings when prices rise. Investment bankers and other investors also do the same during the buyback. The board members didn't technically manipulate the market, it's outside speculators trying to get rich quick that pump the price.

[Asker]

"CEOs have a fiduciary responsibility to act in the interest of their organization, not in their own interest" LMAO - you believe that's what they do?

Musk wants 10% of the value of Tesla to be handed to him. Boeing stopped bothering with producing quality aircraft.

"The board members didn't technically manipulate the market"
Before the 1980's that's exactly what it was called, and that's because the result is entirely predictable; more money for the C-suite, less for the company to invest.

[patois]

"LMAO - you believe that's what they do?" Hahahah... Yeah, because they represent the largest share holders... If you had two brain cells to rub together, you'd understand that how that works out. Every year there is a shareholder meeting, and share holders get to vote on board members. Every share is a vote. Thus the wealthy people that are primarily stock holders along with the investment companies (i. e. Vanguard, Blackrock, State Street, etc.) that hold the bulk of the shares control the bulk of the votes. As a result, they win the elections every single time and get to install people that represent their interests. They are the controlling owners of the company, thus they put people in power that represent them. You on the other hand maybe hold a hundred share or whatever so they don't give a shit about you. You're not a major voice and have no power. You get mad that the primary share holders do better than you in the market, but like I said it's their fiduciary responsibility to act in the interest of their organization. It's a big club and you ain't in it.

[Asker]

Can I interest you in a bridge, going cheap?

[patois]

What's even worse for retards like you, is that you invest in mutual funds, retirement plans, pensions, etc. which sign over your votes every year to investment companies like Blackrock, Vanguard, and Statestreet to vote for you by proxy at those annual meetings, thus you give up your right to vote voluntarily and hand it over to the very people you claim are conning you. It's pretty hilarious really.

[patois]

The corporation is a prime model for communism. All the workers think they own the means of production with their small share of stock, but they hand over all the decision making via proxy voting in investment instruments to the dictators and in the end the party officials live large while all the worker bees get butt fucked.

[Asker]

I'm not saying corporations are good, there's a club and we're not in it. My point is that if they see a chance to make money, they take it, even if people end up dead. The opioid crisis was kicked off by a corporation. They do not care about people, or where the company will be in five years time, they care about themselves.

[Asker]

... and I just gave away that I didn't read through your earlier comment completely!

The interests of a company should be that it will still be around in 10, 20, 100 years. That takes vision, foresight, and investment. CEOs will do anything for a quick buck.

[patois]

No the interest of the "publicly" traded corporation is to turn a profit for the share holders. I will repeat it a third time, they have a fiduciary responsibility to act in the interest of their organization nothing more, nothing less. If that means the primary share holders get to make huge profits off of making quality airplanes that are in demand that everyone wants or they make garbage airplanes that fall out of the sky, workers may get fired or have their wages cut, but the investors liquidates the corporations assets and carry out stock buybacks to make primary stock holder a profit the end result is the same, the share holders have the opportunity to turn a profit. Little guys that own 100 shares or works in the factory often lose in the transaction, but the organization is primarily composed of party officials (i. e The Vanguard) [https://en. wikipedia. org/wiki/Vanguardism] [https://investor. vanguard. com/corporate-portal] that have millions of share collectively. It's a communist democracy... A democracy is nothing more than mob rule, where 51 percent of the people may take away the rights of the other 49. That's how communism works. The public owns the means of production and the party gets to steer the ship for the public. It leads to corruption and more often collapse. Once you have had an Initial Public Offering to trade on the exchanges, you have gone Public and you are now at the mercy of the party.

[patois]

In contrast in a capitalist economy, capital assets such as factories, mines, and railroads can be privately owned and controlled, thus since a private person or family for example owns the company, it is in their interest to improve it's reputation by providing good service and quality products to the market that the public wants and to continue to improve their capital holdings so that profits for the family improve and work is available generation after generation. In order to get quality product, you have to have quality workers, which means wages often go up on the lower end making the workers rich and happy.

[Asker]

I'm impressed how you've turned a valid point about the evils of capitalism into an attack on communism. That makes this a very confusing conversation.

The idea that a publicly owned company only owes its shareholders and the people working there mean nothing is the problem, which is why there are laws to protect the employees and to avoid market manipulation.

You've pointed out, once more, that stock buybacks are market manipulation (if we do this instead of investing in the company the share price will go up); there used to be a law against them, there no longer is, and people are dying as a predictable result.

[patois]

Stock buybacks are a transfer away from Communism toward Capitalism. If the company could repurchase 100% of their shares, they would again be Capitalists. The problem with Public markets is that it exposes shareholders to Vanguardism. allowing the Communist Party to exploit the little people. Anyone who associated with the Communist Party by investing in corporations in which they have the controlling share, have to sacrifice their own interests to the more politically advanced sections of the Revolution Vanguard so that they can push their objectives forward as they attack Capitalism. This is why you end up with woke companies, that push woke agendas via ESG in the fortune 500 at the expense of corporate profits. Do they sound like Capitalist to you? No, they are Public companies. They aren’t interested in you as an individual cog making profit. They again have a fiduciary responsibility to act in the interest of their organization which is The Vanguard. Like I said, once you haven an IPO and are traded on the Public markets the means of production are transfer to the Public and you become Communist. I’m in favor of stock buy backs because I think companies should be Privately owned, not Publicly owned and when a corporation buys back their stock they get closer to being Capitalists. The little guy gets hurt when Communist have their way.

[Asker]

That's nuts. Apart from anything else, capitalists would only buy 51% of any company, a controlling interest, and to hell with everyone else.

[patois]

You don't really seem to understand what capitalism is. Capitalism is economic individualism. As Adam Smith put it, it's the pursuit of one's natural liberty. You look out for your own self interest. You can't do that when other people own your company. When groups of people own stock in your company you have a fiduciary responsibility to act in the interest of the organization or the collective and majority always rules at the expense of the minorities. Collectivism is a socialist framework.

[Asker]

Seriously? You don't see the disconnect between "You look out for your own self interest" and "you have a fiduciary responsibility to act in the interest of the organization or the collective"?

[patois]

You don't seem to understand what an individual is either... An individual looking out for their SELF interest, is not an appointed party official looking out for the majority of the collectives interest. I know this is hard for you to process, being that you and your commie buddies have no original thoughts and you all raise your fist together... One of us! One of us! Just because you lack mental capacity and creativity does not make your group an individual. It just makes you a cult member. I honestly don't get why you have such an issue with stock buybacks. You commies love when the government taxes the shit out of you for the greater good. That's all their doing when they strip you of your promised dividends and board members get to live more lavishly.

[Asker]

Well, this has been nuts.

[patois]

You sure are "nuts". It's great that you call yourself that though. It's funny that you are signing out like you're a news broadcaster... For communist news nightly, this has been Tom Brokaw, good riddance and good night.

[Syntosi]

I do not see a positive reason for it aside from just artificially pumping the value of a company by them buying their own stocks. It is not something in the best interest of your average person and as such its just easier to make it illegal.

[Anonymous]

Yes, no problem