eli5: what are stock buybacks, why are they generally considered a bad thing (for most of us), and what’s the rationale for having it?

Question

eli5: what are stock buybacks, why are they generally considered a bad thing (for most of us), and what’s the rationale for having it?

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Answer 1

A stock buyback is when a public company buys back a portion of the outstanding (publicly owned) shares of their own stock.

Investors generally like this because stock buybacks happen at a premium, meaning that their shares are bought out for more than their current value.

To society in general stock buybacks are a negative because the Company is taking it’s excess cash and using it to do nothing but enrich shareholders.

What would be best for society/economy is if the Company instead used that cash to invest in new tech/research or simply paid their workers more/hired more workers. All of those activities would stimulate long term economic growth.