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?

In: 63

Answer 1

Imagine you own a bunch of shares in a company and you also run it.

Imagine you could just sell your shares to the company you own, to transfer this money into your pocket. But this gets taxed!

Instead, you could get your company to buy other people’s shares, raising the value of yours, and take out a loan secured on them to release this value if you need it. No tax paid by you.

Sure, there are decent reasons for stock buybacks, but there are many dodgy ones.