Great American technology They swim in money in cash but to a large extent they are preferring to spend it repurchase their own actions rather than invest.
How the mechanism works. A shares is simple: the company uses its cash to buy its own market shares and withdraws them. If a company has 1,000 million shares and repurchase 100 million, there are 900 million.
The trick is in arithmetic. If the benefits are the same but there are fewer actions, the benefit per action Go up. A company that earned 10,000 million with 1,000 million shares showed 10 dollars of benefit per share. With 900 million shows $ 11.11. The metric goes up even if the company has not improved at all.
- Executives charge on actions on actions. Your compensation increases.
- The funds see the value of their portfolios without waiting for years to mature real investments.
- The company avoids the risk of investing in projects that can fail ..
It is capitalism without capitalism: financial returns without real value creation.
Why is it important. The further reason towards the tendency to an increasing repurchase of actions can be inferred: fear. The American political climate has become especially complex for large industrial investments. Bureaucracy, regulations. It is safer to return money to shareholders than to risk building something real.
Meta tried to expand his campus in Menlo Park next to a plan to create affordable homes and He crashed into years of bureaucracy. The project has been in pause for some time. Amazon He left his plan to open a second headquarters in New York for the strong political protests that unleashed his announcement. Intel has been trying to open factories. And seeing how China ends them in a couple of years.
The financial refuge. Act repurchases have become the bunker where technological ones hide their cash. In 2025 They will exceed the billion dollarshistorical record.
Warren Buffett himself, nothing suspicious of anti -capitalist, has once said that Many repurchases are “stupid”. Explained that they benefit more than paid executives in Stock Options (Actions options) than long -term shareholders.
The context. The repurchases They were illegal in the United States until 1982when under the presidency of Ronald Reagan they were authorized. Until then they considered a form of market manipulation.
- They are now the main way to give back shareholders.
- They exceed traditional dividends.
A Study of the Roosevelt Institute of 2018 He showed that S&P 500 companies then spent 94% of their benefits on repurchases and dividends, leaving barely margin for productive investment.
And now what. In the United States, some Democratic senators proposed a couple of years ago a 4% tax on repurchase programs to discourage them. What came from the hand of Biden It was 1% that has not had a great effect.
For Europe, which depends technologically on the United States, this trend is worrying. If Silicon Valley prefers financial engineering to real, vulnerability against Chinese advance increases.
Outstanding image | Roberto Júnior
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