Buybacks vs. insiders (Stocks with biggest buybacks are being sold by insiders!)

CBS MarketWatch ^

[BlackJack]

Not one of the stocks in BuyBack Letter's "Dogs of the Dow" portfolio -- the five Dow stocks with heaviest current buybacks -- get a positive rating from Vickers. Boeing (BA: news, chart, profile) and AT&T (T: news, chart, profile) are neutral -- insiders are not decisively buying or selling. General Motors (GM: news, chart, profile), Philip Morris (MO: news, chart, profile) and Exxon Mobil (XOM: news, chart, profile) are all being sold by insiders, with General Motors the heaviest.

These are all stocks, remember, where the management that is selling personally is simultaneously buying on behalf of the shareholders.

[BlackJack]

This is incredible. Management is using stockholders money in buybacks while insiders are selling. Cashing out those options with stockholder's cash? LOL

[Texas_Jarhead]

sure why not help prop up the stock price with OPM (other people's money) so you can dump your own shares. makes perfect sense

[Moonman62]

What worrys me is that everyone in government is getting a guaranteed pay raise, while more people than ever in the private sector are facing pay cuts and layoffs.

Concerning the selling and buybacks mentioned in this article, the shareholders can also sell at anytime if they don't like the arrangement.

[Young Rhino]

Depletion of cash reserves through stock buybacks indicates two things are going on: (1) the companies are not in acquisition mode due to uncertainty in the economy, and (2) the execs are positioning the companies as less attractive targets for takeovers. Sitting on a large cash reserve with a depressed stock price is just asking for a LBO.

[AntiScumbag]

This is incredible. Management is using stockholders money in buybacks while insiders are selling

not incredible at all

first, contrary to what most of the public thinks, buy-backs usually have mostly negative implications

it is the opposite of raising capital, and often an admission by management that they have no better use for the money either in their own business, or in any other which they might acquire

second, "insiders" usually includes many, many more individuals than just the board members who approve buy-backs

assuming that the typical insider has better info about future prospects, their selling is merely the result of what they know, and a buy-back in place is confirmation of the negative outlook

on the broader subject of buy-backs, i think they generally operate as a fraud on the typical investor, most of whom think buy-backs are "good"

other than acquiring shares for future use in employee option grants, there is no valid business purpose to buy-backs, they do not change total earnings one iota, in fact, if anything, they may reduce future total earnings as they reduce capital

even the sometimes proffered rationalization that a higher share price is a substitute for dividends and converts ordinary income into capital gains for shareholders is often a chimera as there is no direct relationship between buy-backs and share price

not to mention the fact that to actually receive the income the holder has to sell some small fraction of their shares, something most don't do because a "dividend-substitute" buy-back is going on

[dark_lord]

...and often an admission by management that they have no better use for the money either in their own business, or in any other which they might acquire

The thing that always pissed me off about buybacks is they could pay that money out to the shareholders as dividends. But NOOOO! Can't turn the money over to the company owners. Let company management fritter it away!