Share buybacks are back above pre-COVID levels.
Frequent readers of these pages know that we are generally not in favor of share buybacks. Buyback activity has exploded since 2009 when the Fed began its low interest rate and QE monetary policy to artificially prop up equity and credit markets during the financial crisis. Public companies of course have issued record debt in the years since largely to deploy toward share repurchase programs, thus bolstering the equity component of CEO and Executive compensation packages. This corporate behavior reflects poor corporate governance – particularly within the Technology industry – where technology evolves so rapidly. Innovation suffers as a result. We would much prefer that Technology companies run internal Corporate Venture Programs, allocating a small percentage of OpEx each quarter to New Product Development activities which may spur revenue growth in future quarters. When investors are ultra short-term focused as has been the case for the past 20-plus years Management Teams behave in a short-term manner. This behavior includes enriching themselves and short-term shareholders by deploying over-sized share buyback programs at the expense of long-term innovation.