“Corporate cocaine”, “sugar high for corporations”, and “stock price manipulation” – all phrases media use to describe share buybacks. In a buyback, a corporation buys its own shares, often in the open market but sometimes through a tender process.
This is very much in vogue in the US. Share buybacks total US$750 billion year-to-date, already more than 2017’s full-year number. Goldman Sachs estimate it could reach US$1 trillion by year-end. Corporate tax cuts in the US have been the main ingredient fuelling the fire, combined with record levels of cash on hand at some of the world’s largest companies.
From an investor’s perspective buybacks can be broken into three groups depending on how deeply you investigate them – these are the “good-bad-good” of share buybacks.