Tags: warren | stock buy backs | market | sec

Sen. Elizabeth Warren Rails Against Companies' Stock Buybacks

elizabeth warren speaks into mic
Sen. Elizabeth Warren (D-Mass.) holds a news conference to announce legislation that would tax the net worth of America's wealthiest individuals at the U.S. Capitol on March 01, 2021 in Washington, D.C. (Chip Somodevilla/Getty Images)

By    |   Tuesday, 02 March 2021 12:04 PM

Sen. Elizabeth Warren, who has urged the Securities and Exchange Commission to reverse the regulations introduced under President Ronald Reagan to allow companies to inflate prices through buying back their own stock, Tuesday lambasted the practice as "nothing but paper manipulation."

"'Everybody’s doing better?' Listen to yourself!” the Massachusetts Democrat told CNBC "Squawk Box" host Joe Kernen after he asked her how buybacks can be a problem if they raise money for a company. "Nothing about the business changed. They’re still turning out the same number of widgets at the same cost and selling them to the same customers.”

Share buybacks, she said, are market manipulation designed to inflate executive pay, adding that the money spent would be better used to reinvest in a business or its workers. 

“They got a little fluff-and-buff in their stock," said Warren. "How did they do that? By taking their excess cash and saying, ‘Geez, we can’t figure out anything to do with this cash. We’re not going to give it back to our investors. We’re going to make the investment decision that the only investment in America that makes any sense is to buy back our own stock.’”

Show co-host Becky Quick asked Warren what the difference is between a company's board approving a billion-dollar buyback program or one business partner buying out a partner wanting to sell equity. 

"If you want to buy your partner’s shares and you want to hold your partner’s shares, that’s fine, but that’s not what share buybacks are," she explained. "Share buybacks are going into the market and pumping up the price of your shares by using your own cash, not to invest in business."

Companies could also consider quarterly dividends as a better and less manipulative method for returning corporate cash to stakeholders, Warren said. 

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Politics
Sen. Elizabeth Warren, who has urged the Securities and Exchange Commission to reverse the regulations introduced under President Ronald Reagan to allow companies to inflate prices through buying back their own stock...
warren, stock buy backs, market, sec
299
2021-04-02
Tuesday, 02 March 2021 12:04 PM
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