The value of stock buybacks come from lowering shares in circulation. Fewer shares means that shareholders have to share profits with fewer, leading to larger profits or dividends per share.

How do you see that as a Ponzi scheme?

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saghm 3 hours ago | parent [-]

I see it as a Ponzi scheme when people argue that they're a replacement for dividends. You're describing them as if dividends are an assumption, in which case they're perfectly reasonable.

	▲	throw-qqqqq 3 hours ago \| parent \| next [-]
		Even for companies that do not pay dividends, buybacks should increase the value of each share, because you share profits with fewer other shareholders. Buybacks raise the EPS/earning-per-share by lowering the denominator (number of outstanding shares). EDIT: If P/E stays the same, but the E (earnings) grows, the P (price) has to grow too. I think it’s quite uncontroversial to equate buybacks with dividends. Personally, I prefer dividends, even if they’re suboptimal tax-wise.
	▲	wat10000 2 hours ago \| parent \| prev \| next [-]
		I don't think buybacks are really the thing here. The question is why a stock would have value if it doesn't pay dividends. If there's a good reason for that then buybacks are perfectly sensible. If there isn't then such companies are engaged in some sort of weird scheme regardless of buybacks.
	▲	neutronicus 3 hours ago \| parent \| prev [-]
		They're currently a replacement for dividends because dividends are less tax-efficient than stock buybacks. I struggle with the same initial impression as you, and have reached an uneasy peace with the status quo by telling myself that the stock price is about the amount of dividends the company could issue in a dividend-friendlier tax environment, once its growth plateaus and it goes into cash-cow mode.