The problem with buybacks, Dell edition

http://blogs.reuters.com/felix-salmon/2012/09/04/the-problem-with-buybacks-dell-edition/

by microtherion • 14 years ago

26 4 14 years ago

blogs.reuters.com

r00fus• 14 years ago

So Dell is over-self-bought - they are a large counterparty to the all selling on the open market.

Buybacks make sense for a company when the stock is weak compared to the value of the company. Apparently when Dell was doing great, they thought the stock was undervalued?

The reality is that the CEO and officers of the company are highly vested in the stock, and having it in the gutter consistently is bad for business - thus the buybacks (which I consider a form of artificial inflation)... the only problem is that Dell as a company isn't doing well enough for those re-investments into the stock to have paid back - which may never happen either. Don't the stockholders have a say as to whether the company can buy back it's own stock - perhaps the voting stockholders are to blame here.

veyron• 14 years ago

Michael Dell hopefully dumped enough shares to have sufficiently large warchest to buy back dell ...

prewett• 14 years ago

Besides companies often buying back stock when it is high, one thing that often happens is that they buy back shares to offset the shares they are giving to employees. I bet if you look at the number of shares at the beginning and end of the period I'll be they are more or less the same. Perhaps Dell wasn't as profitable as the author thought, if the cost of options had actually been factored in.

And I don't see how a stock dividend ("scrip dividend" in the article) is any solution. All it does is multiply everyone's number shares by some percentage. So, of course, the market just cuts the price by that percentage. It's not taxed because 10 shares @ $10 = $100 and 15 shares @ $6.66 = $100. It's not taxed because no money is actually given.

Evbn• 14 years ago

Blogger is mistaken. Scrip dividend doesn't solve the excess cash problem.

The problem with buybacks, Dell edition

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