We dove into the data, studying 385 buybacks over the last fifteen months….First, we found that a buyback announcement leads to a big jump in stock price….That’s unsurprising….What did surprise us, however, was how commonplace it is for executives to use buybacks as a chance to cash out. In half of the buybacks we studied, at least one executive sold shares in the month following the buyback announcement….In the process, executives take a lot of cash off the table. On average, in the days before a buyback announcement, executives trade in relatively small amounts—less than $100,000 worth. But during the eight days following a buyback announcement, executives on average sell more than $500,000 worth of stock each day—a fivefold increase. Thus, executives personally capture the benefit of the short-term stock-price pop created by the buyback announcement.So there you have it: that corporate tax cut went right into the pockets of executives and other big stockholders.
Saturday, August 4, 2018
Stock Buybacks and Executives Enriching Themselves
You all recall that rather than spend the money from their Trump tax cuts on raising salaries or new investments, many American companies used them for stock buybacks. Stock buybacks generally enrich stockholders, but some new research shows that some executives use them as a crass way to enrich themselves: