“We have so much capital, we cannot use it,” Jamie Dimon of JPMorgan quipped to investors. The bank’s cash pile has doubled over the past year, to more than $500 billion. It’s a similar story at other banks, and now that they’ve been cleared by regulators to resume share buybacks, “we’re going to be aggressively…
Tag: buybacks
The Dangers of Buybacks: Mitigating Common Pitfalls
Sarah Keohane Williamson, Ariel Fromer Babcock, and Allen He, FCLT Global say that the dangers of stock buyback programs include executive compensation gaming, employee trading, contribution to income inequality, excess leverage, and poor timing of investment decisions. Buybacks are often associated with long-term value-destroying behaviors, including several means of personal gain and enrichment, poor timing…
Opinion | Stock buybacks and a shaky economy – The Washington Post
There are two main channels for funneling profits to shareholders: dividends and stock repurchases. From 2000 to 2017, dividends and stock buybacks totaled about $10 trillion, finance professors Kathleen Kahle of the University of Arizona and René M. Stulz of Ohio State University report in a just-released working paper by the National Bureau of Economic…
Boeing’s crisis is largely of its own making – The Washington Post
“Wall Street got Boeing’s cash; Main Street gets the relief bill.” If you want an example of how keeping Wall Street happy can undermine your business, look at Boeing. If you’re also interested in seeing how already-well-paid corporate directors can get a raise while presiding over a horrendous mess that helped lead a company to…
Some Companies Seeking Bailouts Had Piles of Cash, Then Spent It – The New York Times
Still, the crisis has exposed the potential failings of a strategy embraced by many big companies: aligning their priorities with the interests of shareholders, many of whom are narrowly focused on the performance of a company’s shares. Shareholders, wanting stock prices to go higher, pushed management to use up cash on buybacks and dividends. And…
AT&T Sneaks Away Voting Rights With Coercive Buyback/Exchange Offer
We’ve got a sense of deja vu here. Back in the early 80’s companies tried to get the NYSE to approve coercive exchange offers of non- or limited-voting stock with a slightly higher return for shares with voting rights. We note that there is already such a security available for anyone who wants to buy…
Buybacks: The company says buy, but insiders sell – The Washington Post
VEA Vice Chair Nell Minow is quoted in this Washington Post story about executives selling their stock into buybacks: Repurchases enrich executives several ways, says Nell Minow, vice chair of ValueEdge Advisers, which counsels investors on corporate governance issues. “It’s a triple dip,” Minow said, that works like this: Here’s how stock buybacks work and…
Examining Corporate Priorities: The Impact of Stock Buybacks on Workers, Communities and Investors
In testimony before Congress, Harvard Law School professor Jesse Fried outlines the potential for abuse in stock buybacks: Executives can use buybacks to transfer value from public investors to themselves, reducing investor returns and, perhaps, distorting corporate decision-making in a way that reduces the size of the overall economic pie. This abuse is facilitated by…
Boeing and the siren call of share buybacks | Financial Times
One of the oddities of the modern US stock market is its strong predilection for share buybacks. Rather than finding profitable outlets for their cash holdings by investing internally, corporations have taken to shrugging their shoulders and simply handing the stuff back en masse. The idea of shrinking the number of shares outstanding has acquired…
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