Pushback on buybacks… 🙄

Over on my rugby site I recently saw a link on Twitter to an article I wanted to read and to read it I had to get a free subscription to the publication so I signed up with a view to cancelling once the money was about to kick in.

Well, that time is approaching so I thought I’d share this “article” with you because I thought the headline was hilarious.

“BUYBACKS AREN’T BAD”???????????

One of the reasons they ARE bad is that corportions used govt handouts after COVID to buy back their own shares rather than to help their customers by lowering prices. This article tells us it’s a good thing because it helps provide a good dividend for investors. Well DUH!!!! That’s like a bank robber saying the theft was good because it helped him buy a Rolls Royce!!!!

The argument laid out in this argument is essentially “trickle down economics” which is all I need to know that I should NEVER pay for subscription, Shame, because they do have quite a few rugby articles, although if anything that fact helps underline the contradiction of a Progressive following rugby union! Might as well move into golf and Polo as well while I’m at it!!!

I have copied a bit of the article just to show I’m willing to let the author make his own argument, while respecting the firewall by not publishing the whole lot.

When companies buy back their shares, as AIB did two weeks ago, it’s common for them get stick for it. You’d expect criticism of the practice from The Guardian, but even the Harvard Business Review is piling on.

Their argument goes like this: it’s bad when companies buy their own shares back because it’s money that could have been used for wages or investment. The argument is that buybacks reduce wages and investment, so they’re bad for society.

But buybacks are good for investors. And more importantly, they’re good for society.

A company is doing a good job when it’s maximising its value. Obviously that’s true from the perspective of the company’s shareholders. But it’s true for society too. 

When a company is maximising its value, it’s combining a bunch of inputs like land, labour and machinery in such a way that the whole is more useful than the sum of its parts. Society gets more value from a bakery than it does from flour, workers, vans, ovens and land. The extra value created for society is reflected in the value of the combined entity, relative to the value of the separate inputs. 

Sean Keyes on investing: Buybacks aren’t bad bad