FYI: Progressive politicians have pounced on corporate share buybacks lately. They want to limit or even ban them. They see buybacks as a major source of income and wealth inequality, subpar capital spending, and lackluster productivity. Stock market bears have been growling about buybacks, as well. They argue that repurchases have rigged the market in favor of the bulls.
The facts don’t support the narratives of either the progressives in Washington or the bears on Wall Street. The most common reason that S&P 500 companies buy back their shares is to offset the dilution in the corporate ownership stake of the shares outstanding that results when employee compensation takes the form of stock options and grants that vest over time, not just for top executives but for many employees. In effect, the source of funds for most buybacks is the employee-compensation expense item on corporate income statements, not bond issuance.
Regards,
Ted
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