How are buybacks defrauding anyone?

They just return money to shareholders. The only material difference with dividends is the tax treatment. Even all the incentives are the same.

> It's also unsustainable, in that you can only do this for so long before you've bought up all the open shares and there's so few remaining that your company is no longer effectively tradeable.

What makes you think so?

https://en.wikipedia.org/wiki/Stock_split might blow your mind.

> To the extreme, we end up with all the large companies doing this becoming effectively private, owned by a small group of folks rich enough to keep their holdings while everyone else sells out during the buybacks. That's not good.

You can tell your broker to automatically re-invest dividends for you.

Similarly, if you just don't sell when there's a buyback, you own more of the company afterwards. No one is forced to sell.

Btw, most companies (including Apple and Google) keep issuing shares to employees. Buying back some of them in the open market is just an indirect roundabout way of essentially handing employees cash.

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marcus_holmes 10 hours ago | parent [-]

> How are buybacks defrauding anyone?

Mr Doctorow's point is that the company is taking money from its operations, which it should be spending on expanding those operations and increasing its value, and spending that money on artificially inflating its share price, by effectively wash trading the shares, creating artificial demand, and artificially reducing supply.

If you bought shares in the company as a long-term position in order to receive dividends then you do not benefit from buybacks, and arguably lose out (because the money used on the buyback could have been distributed as a dividend). It only benefits short-term speculator shareholders. And, of course, the executives who are incentivised on share price, for whom a buyback is a much, much, easier way to get those incentives than actually doing their jobs and using the money to grow the company.

	▲	eru 10 hours ago \| parent [-]
		Thanks for the explanation. How is any of that fraud? Fraud doesn't just mean you have to disagree with something someone does, but you have to have been lied to. > And, of course, the executives who are incentivised on share price, for whom a buyback is a much, much, easier way to get those incentives than actually doing their jobs and using the money to grow the company. Companies can and should adjust the incentives so that the effect of dividends and buybacks are the same for the executive. (They already adjust for share splits for example.) > If you bought shares in the company as a long-term position in order to receive dividends then you do not benefit from buybacks, and arguably lose out (because the money used on the buyback could have been distributed as a dividend). Before you buy any shares, you should check what management says about their plans. At least, if you have specific expectations. Even if buybacks were outlawed, companies aren't guaranteed to pay dividends. It's perfectly legal to never make a profit, or to give all your excess money to charity. You just have to tell your shareholders. > Mr Doctorow's point is that the company is taking money from its operations, which it should be spending on expanding those operations and increasing its value, and spending that money on artificially inflating its share price, by effectively wash trading the shares, creating artificial demand, and artificially reducing supply. Yeah, that's a stupid objection. The substantial first half of it would equally well apply to dividends. (And the whole point of giving money to companies as an investor is that eventually you are getting more back.) The second half is just not how any of this works. Does he even know what a wash trade is? And what's 'artificial' about this?