When a company pays a higher sum of money to buy its shares, they can create confidence in the minds of investors. Critics say that instead of making the rich richer through buybacks, companies could instead pay higher wages to their workers. The other argument is that buybacks only provide a temporary artificial boost to stock price. So how do you reconcile the two? Maybe the answer lies in what some US senators suggested years ago: Companies should be allowed to indulge in stock buybacks.
A couple of days ago, legendary investor Warren Buffett published his annual letter. And he showered praise on stock buybacks. On the other hand, just a month ago, President Joe Biden criticized companies that indulged in the practice. He wanted to tax buybacks heavily.
So in today’s episode for 1st March 2023, we explain why stock buybacks are such a contentious issue.