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?
In: 63
Most people are focusing on what buybacks are and not necessarily how they can be a bad thing. I’ll give a concrete example: Airlines.
Airlines in recent years have done tons of stock buy backs. However buy backs only benefit people who own the stock. 90% of stocks are owned by the wealthiest 10% of Americans. This means that buybacks only help the rich. Meanwhile the airlines have very old and outdated technology. The Southwest Airlines disaster around Christmas was caused by outdated and inefficient systems that desperately need to be upgraded. Instead of making upgrades to improve the company Southwest does stock buybacks so rich people who own stock make more money while millions of Americans who need to use the airline get stranded at Christmas and are unable to see their families.
Latest Answers