Biden announced a quadrupling of the corporate buyback tax
- The tax will be applied to stock purchases made by domestic public companies
- Corporate stock buybacks are driven by "greed," of course, and allegedly fuel "wealth inequality."
- Instead of repurchasing shares in the market, say activists, employees should be given pay increases or new innovation should be explored.
The funds raised by taxing buybacks will go to address the numerous groups severely injured by stock buybacks.
- Teachers, firefighters, union workers, and other groups will receive US government checks cut from the buyback tax fund to remedy the gross inequalities rooted in the heinous act of firms buying their own stock in the market.
When CEOs decide to buy back stock, they are conceding that there are no clearly profitable projects, worthwhile product lines, or synergistic acquisitions worth spending on
- Stock buybacks are not driven by "greed"
- The chart below shows that large scale corporate share repurchases do not drive up stock prices
Buybacks aren't undertaken with the sloppy momentum buying seen in meme stock trading campaigns
- Most are undertaken as block purchases from asset managers
- In the event buybacks were to drive stock values into egregiously overvalued territory, two things would occur
- Short sellers would sniff out the excess profit opportunities in no time at all
- The firm purchasing its own stock would have accumulated a position in overvalued stock
Questions remain
- How are the stock purchases associated with the issuance of convertible bonds to be treated?
- What of share repurchases undertaken as part of anti-dilutive measures to balance shares associated with 401Ks or Employee Stock Options Plans (ESOPs)?
- Will Special Purpose Acquisition Companies (SPACs) or corporate actions like mergers and acquisitions trigger the tax?
- These questions will all need to be answered in the future.
https://www.aier.org/article/government-siphon-targets-corporate-stock-buybacks/
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