Microsoft Financials 2021 Q2

Indeed. I don't invest in companies because of my selfless philanthropic nature!

 

https://hbr.org/2020/01/why-stock-buybacks-are-dangerous-for-the-economy
https://www.forbes.com/sites/peterg...are-banned-let-it-be-a-trend/?sh=648b9baa6530

the US government banned companies that received federal aid during the corona handouts to spend this money on buybacks, as they do not grow the economy or even help out the company that does it (Just ask intel), but they do help out the board of directors

 

stock buybacks do help the one thing that shareholders truly care about though, the stock price. The government handouts were intended to keep businesses afloat (ie not bankrupt), and as such the government quite rightly disallowed stock buybacks. If the companies receiving the handouts didnt need the money for operating costs and decided to do a stock buyback with the handout cash, they didn't really need the money in the first place.

 

You do know that bought back shares aren’t often thrown into an incinerator to be forever lost in time. In other words, if share buyback only benefit shareholders, doesn’t the company that does the buyback benefit because technically it’s a shareholder too.

Some people may look at it as if bought back shares vanish into thin air and remaining public available shares have to raise in value to maintain the market cap. But how often does that happen? And companies have the option of offering a dividend if they simply want to give cash to shareholders.

However, converting cash to shares has potential benefits that staying in cash does not offer. Currency does not hold its value over time. Long term inflation decimates the value of currency. So it makes little sense for MS or other huge companies with large reserve to maintain those reserves in cash.

Unless, needed for operation cost, marketing or projects, cash is converted to investments that either resistance to inflation or benefit from it. Share buybacks are just a tool that tells the market that the company feels so positive about itself its willing to invest in itself rather than other investment vehicles.

And yes, some of those shares are going to board of directors and other high level executives. But for executives of companies with poor outlooks in term of future revenue, profit and overall company value, they are saying, “Nah, I rather have the cash, I’ll take it and buy some Apple, Tesla or something other than this piece of shit.”

Could some company abuse the tool to bump share prices temporarily. Of course, but it doesn’t mean share-buybacks in general are bad.