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Stock Buybacks: Show me the Money!
Just as it was the job of fictional sports agent Jerry Maguire (played by Tom Cruise) to get his clients the best deal possible, corporate executives and boards have the same responsibility for their shareholders. Perhaps the most direct way for boards to show investors the money is a stock buyback. In the past decade, […]
Allison Wyderka is the Head of Product and Research for Proxy Services, and Wickham Egan is the Director of Business Development and Operations, at Egan-Jones Ratings Company. This post is based on their Egan-Jones memorandum.
Just as it was the job of fictional sports agent Jerry Maguire (played by Tom Cruise) to get his clients the best deal possible, corporate executives and boards have the same responsibility for their shareholders. Perhaps the most direct way for boards to show investors the money is a stock buyback.
In the past decade, share repurchases have drawn the ire of many, with critics arguing that they line the pockets of executives at the expense of long-term shareholder value. However, in our view, share repurchases often accomplish the very purpose for which a public corporation exists: increasing shareholder wealth. Share repurchases serve to increase the ownership of each individual investor and boost the stock price while avoiding the income tax that accompanies a dividend.
