Stock buy-backs are complicated. It's not 100% negative. It is a market making activity. It can be re-issued later for a cash flow uplift if the value of the stock rises (which is what Seattle is probably focusing; the buy-backs are only to provide income to the insiders along with all the other shareholders). It can help offset the dilution of ESOP's, the vesting of stock options along with other dilutive financial instruments. It can lower the amount of dividends later owed if the net outstanding is reduced.
Yes, the cash could be retained to invest in I&D. It could be given out as a bonus to employees.
But it's not your company is it? The buy-backs are not a signal that senior management are all going to retire soon or anything nefarious like that. EVERY major corporation engages in buy-backs. What should we do? Outlaw the practice?
I guess what Seattle wants is the reduction in the tax rate (35% to 21%) to be given to the employees. The employees can quit if they don't like it. I doubt they will though because they have other benefits that probably speak loudly.
Apple is a multi-national corporation. Their competition is not solely limited to our shores. I think it would require quite a bit of analysis to conclude that the buy-backs were the worst case scenario for the American taxpayer.
Last edited: Dec 30, 2018