- GE spent more than $21 billion on buybacks in 2016. The stock price is now down more than 30%, thus that $21 billion was thrown away.
- Other S&P 500 companies aren’t much better and their time to reckon with financial engineering will come too.
- The more buybacks a company does, the lower the market cap will be in 5-years, which is something managers don’t want to know.
In December 2016, I wrote an article titled Is Your Value Being Destroyed? where I discussed how buybacks are destroying long term shareholder value.
My favorite example from that article was General Electric (NYSE: GE) because it seemed completely illogical to me that a company would sell valuable assets in order to increase buyback activity because this isn’t how you operate a business, this is pure short term financial engineering. More →