

Share buybacks are what happen when you run out of ideas. Financial engineering  - mikepmalai
https://twitter.com/garrytan/status/431709411560521728

======
ergoproxy
Damn straight. Look here: "Apple's [Tim] Cook told [Carl] Icahn that he's
still studying Icahn's proposal to buy back $150 billion worth of the
company's stock." Source:
[http://www.cnbc.com/id/101151952](http://www.cnbc.com/id/101151952) (Monday,
11 Nov 2013)

Apple makes about $60B/yr in profit. Ichan wants Cook to borrow $150B to
buyback Apple shares. Icahn and Cook would be the main beneficiaries of this
plan.

I've seen this many times in non-tech firms. Look at Borders book store. They
did several rounds of this over decades to boost their stock price. Each
round, enriching the officers and board members, and piling the company up
with loads of debt. E.g., November 27, 1996. "Borders Group Inc., the retailer
of books and music, said today that it would buy back up to $50 million of its
common stock." [http://www.nytimes.com/1996/11/27/business/borders-in-
stock-...](http://www.nytimes.com/1996/11/27/business/borders-in-stock-
buyback.html)

Eventually, they couldn't service their debts and they went bankrupt. The
officers and board members couldn't care less. They got rich. Their employees
and customers got screwed. Their creditors took everything including the
pension fund. Some commentary here: [http://www.datalounge.com/cgi-
bin/iowa/ajax.html?t=11235835#...](http://www.datalounge.com/cgi-
bin/iowa/ajax.html?t=11235835#page:showThread,11235835)

The moral of the story: Corporate raiders and vulture capitalists could care
less about anybody but themselves. They'll gladly drive _successful_
businesses into bankruptcy to make a lousy buck. Along the way, they make the
employees suffer. And they reduce competition in the market place and hurt
consumers. And we make it easy for them as a society by pretending this is how
capitalism is supposed to work. Shame on them; shame on us too.

~~~
Throwadev
How do they get rich off the buy backs? Explain like I'm five. Do all the Joe
Schmoes who own the common stock as art of their 401k's benefit from it as
well?

~~~
pedalpete
They are removing the number of shares on the open markets, so it's a 'less to
go around' type sitation, or you can think of it as limiting supply.

In theory (I believe), the market cap for the company should stay the same, so
each share increases in value. Cook and Icahn are major share holders, so they
would be increasing their value.

However, it isn't a zero-sum game (hope I'm using that correctly) as in the
short term, with rising stock price, all investors win.

On the flip side, the money used for a buy-back is money not invested into
R&D, which for a tech company is obviously very important.

Though, I wonder if Apple may be a bit of an anomaly. They have such a huge
profit margin, and strong following, and a group of customers who will buy
pretty much anything they release at pretty much any (moderately unreasonable)
price.

Apple doesn't spend (and loose) on R&D like Google and Microsoft do. There
doesn't appear to be anything in the Apple quiver which came as a result of
massive R&D effort. Massive design effort, absolutely. Massive engineering
effort, sure. But straight R&D? I don't think so. Happy to be proven wrong
though.

