What does it mean that airlines shouldn’t be allowed to buy back stocks?
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There’s nothing wrong with a profitable company buying back stock, it’s a legitimate way for the company to invest in itself.
The more stock the company owns, the less dividend it has to pay to shareholders, the more profitable the company becomes.
The problem is companies buying back stock not because they are in a financial position to do so, but because:
A) The stock is cheap.
B) They are hoping they can use up all their cash reserves and then be propped up by government bailouts (i.e free money). This will result in better profits in future years.
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