John Hempton writes….I used to be of the view that suggested that buybacks were just another way of distributing to shareholders – a bit like dividends, selectively applied.
You could turn a buyback into a dividend by selling your own shares in precisely the proportion that the company bought shares back. Then your percentage ownership was unchanged and you would have (in cash) your share of the monies that the company distributed to its owners.
I used to think that. But it isn’t quite true because companies can impair themselves with buybacks in ways that you just couldn’t with dividends. Few companies support paying dividends at 2x underlying cash generation. But debt funded buybacks of this size are alas fairly common.
Debt funded buybacks, applied to their illogical limit, will corrupt you, and turn you into a gebbeth – inhabited by the debt (and its evils) you have allowed into your body.
First however I need to recount a parable about how leverage corrupts morality.
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https://brontecapital.blogspot.com/2019/04/mattel-buybacks-barbie-and-dead-babies.html?spref=tw