If you want to understand this fool's market that has existed for years, and which consists of buying back your own shares to drive up the price, without ANY added value, you have to take a step back. This is what I propose to you with this memorable video (below) where Philippe Béchade lets go... And you will understand by deduction that the financial markets and stock market prices, and even money... are the biggest FAKE NEWS of all time, so who is lying? Why do economists (apart from a few) they say nothing ?... This is because our system economic, policy, media is totally CORRUPT, And this, at the highest level, even beyond France... And when the time comes, and it will all have to be bailed out, YOU will (still) be the stuffing turkeys, because the majority of people are so stupid, that they still believe in the fairy tales of journalists and official economists (and that suits them well, as well as of course that shareholders). So, since the time we (and others) have been spreading this information..., do they deserve their fate ? It's up to you to decide. In the meantime it will be the permanent crisis, and incidentally the end of your social achievements. Well yes, remember it's "the crisis"... Finally, above all the fit of laughter for the ultra-rich... in the face of so much naivety.... Do you find that cruel? It's up to you that things change... Share the information beyond this little blog! And emancipate your fellow citizens....
“1000 billion dollars: this is the record amount devoted to the repurchase of their own shares by “Corporate America”, the American firms, in other words. This week alone, the giants Oracle, Johnson & Johnson, and Boeing have engaged in this exercise.
Software giant Oracle announced that it just completed another such deal for $10 million in the last quarter; three months before, he had already done the same thing, for the same amount. The multinational healthcare and hygiene company Johnson & Johnson has for its part indicated that it has acquired for $5 billion of its own shares ; as to Boeing, she says in a press release that it will carry out a new buyback of own shares for an amount of 20 billion dollars, following that which it had orchestrated at the same time in 2017 for 18 billion dollars.
Trump's tax reform decisive
This wave of buybacks of their own securities was fueled by several factors: first, strong US economic growth, but also low interest rates. But according to David Santschi, director of liquidity research at TrimTabs, it's mainly tax reform introduced by President Donald Trump at the end of last year which was decisive: “A large part of these redemptions are due to tax law. Companies have more money to inflate their stock prices”, he explains. The tax reform included a sharp reduction in corporation tax, which fell from 35% to 21%, and measures to facilitate the repatriation of cash that large groups held abroad.
Some of the companies that carried out share buybacks therefore used their own cash, in some cases repatriated from abroad ; others, like Oracle, resorted to borrowing, and took advantage of the still relatively low interest rates in the United States.
The goal: to drive up the stock price
Share buybacks, for example, enabled Oracle to improve the yield per share by 19%, thanks to the reduction in the number of shares available. In return, this increase in the profitability of the title contributes to increasing the demand for this title, and consequently to raising its price (in the case of Oracle, share price rose 3% after the share buyback). Even if the share price does not increase immediately following the repurchase of its shares by the firm, the reduction in the number of shares in circulation implies that their holders will receive a proportionally larger dividend.. Similarly, a stock buyback implies that the firm in question is optimistic about its future prospects, which may encourage investors to take an interest in it.
Nevertheless, critics note that companies often make these buybacks when prices are at their peak, which means they are not always getting a good deal, especially if prices are set to fall due to an economic shock. , For example. “They're doing these buyouts because they're optimistic, and their business is doing well. Most companies don't care about the price or valuation of their shares,” says Santschi.
Between shareholders and employees, companies have made their choice
Finally, others criticize the economic value of these buybacks of own shares: they believe that companies would make a more valuable contribution to the economy if they devoted these sums to increasing the salaries of their employees, or to investments. While the total amount spent on these operations has reached an all-time high, investments in job-creating factories have been much more timid.
It is notably Florida Senator Marco Rubio's criticism, in a tweet: “When a company uses its profits to buy back its shares, it decides that returning capital to shareholders is better for its business than investing in its products or its workers. The tax code encourages this. No wonder we have unstable, low-paying working lives. »
When corporation uses profits for stock buy back it's deciding that returning capital to shareholders is better for business than investing in their products or workers. Tax code encourages this. No surprise we have work life that is unstable & low paying. https://t.co/yHV1qS0yLu
- Marco Rubio (@marcorubio) 13 December 2018
In February this year Patrick Artus, chief economist at French investment bank Natixis, wrote that we are currently seeing a series of developments in OECD countries that are in line to the evolution of capitalism as Karl Marx predicted. He explained that when companies saw their yields falling (which has been the case since 2010), they tended to adjust wages downwards, but when they had reached the limits of this strategy, they moved on to speculation. . And he named the buyback of own shares to raise prices as one of these speculative operations to increase the return on capital”.
Audrey Duperron, Express Business, via Olivier Demeulenaere the 20 December 2018
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