Stock Buybacks Are A Hedge Fund Scam, Experts Howl

Companies have been eager to please Wall Street in what has so far been a lackluster earnings season by repurchasing shares and boosting dividends for shareholders, Nicole Goodkind reported for CNN Business.

Photo Insert: Buybacks, say critics, are a tool that allow ultra-wealthy executives and hedge funds to manipulate markets while funneling corporate profits into their own pockets instead of the economy.

Buyback announcements reached a new record of $1.22 trillion last year, and they're already on track to beat that high in 2023. Companies have announced about $175 billion worth of planned stock buybacks so far this year.

That's more than double last year's pace, according to data from EPFR TrimTabs. This year will likely be the first with at least $1 trillion in completed S&P 500 company buybacks, said Howard Silverblatt at S&P Dow Jones Indices.

Chevron said last month that it would triple its spending on share buybacks to $75 billion. Exxon said it would issue another $35 billion in buybacks and Facebook-parent Meta Platforms saw its stock surge by 20% after the company announced plans to boost its share repurchase plan by $40 billion.

Buybacks used to be banned in the stock markets as regulators consider it a scam and even bankers wanted it regarded as an illegal market tack until Ronald Reagan came along and showered billionaires with more opportunities to earn filthy lucre.

Buybacks, say critics, are a tool that allow ultra-wealthy executives and hedge funds to manipulate markets while funneling corporate profits into their own pockets instead of the economy.

Preventing companies from repurchasing their own shares, they argue, would free corporate cash to invest in growth and raise wages instead.

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