Why Companies Are Regretting Their Buyback Decisions

Why Companies Are Regretting Their Buyback Decisions

Posted On March 11, 2020 1:47 pm

Over the past few years, corporations have been on stock buyback binge, with the years from 2014 to 2019 having a total of $3.5 trillion.  That may come back to bite them.

The peak year for share repurchases was 2018 when it crossed over $1 trillion as companies used the extra-fee cash flow from the reduction in corporate tax rates to buy back stock rather than boost dividends or increase capital expenditures.

stock buybacks q3 2019

Some companies went so far as using the historically low-interest rates to borrow cheap money and apply it to buybacks.  Even “Apple (AAPL)” with its near $150 billion cash hoard decided to issue some $50 billion in debt to put towards the stock buybacks.  With stock prices climbing it seemed to offer a better rate of return. 

And more importantly… Continue reading the remainder of the article at StockNews.com


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Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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