The Stock Buyback Scam

The Stock Buyback Scam

Prior to the 2008-2009 Financial crisis, stock buybacks were typically used by management teams to offset options dilution and to acquire undervalued company shares. Today, companies primarily use stock buybacks to goose the value of CEO options packages as well as to goose the value of shares held by CEOs and large institutional holders. The stock buyback scam is one of the unfortunate outcomes (along with skyrocketing corporate debt), that has resulted from the ultra-low interest rate era ushered in by the Federal Reserve during the Financial crisis.

There is also a significant opportunity cost associated with share buybacks as capital allocated to share buybacks is capital that can’t be deployed toward internal product development, accretive acquisitions and other growth initiatives.

Some of the biggest offenders include Apple (AAPL), Alphabet (GOOG), Meta Platforms (FB) and Oracle (ORCL) to name a few.

Find share repurchase activity courtesy of S&P Global (SPGI) HERE and HERE.

Corporate Debt figures and charts may be viewed HERE.