Why are stock buybacks so controversial?
In: Economics
When companies have extra cash laying around they can choose to spend it on more equipment, better wages, product research, etc. Or they can purchase their own stock.
If they purchase their own stock it will increase the price of that stock (generally when more people want to buy a thing, price goes up). This helps people who own stock in that company because the value went up.
It’s controversial because that money is seen as being selfishly spent on “pumping the numbers”and increasing stock prices. This matters because the CEO both owns stock and is often paid based on stock price. So it is seen as selfish.
That money could have also been spent on other things like wages, etc.
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