WaveNet Pharma

Don't Buy Into Share Buybacks

The rationale for buybacks is to improve earnings per share (EPS). That goal is only meaningful to the extent that a company can sustain its profitability. In our current environment how many do ?

Even with companies having an unassailable market position with essential products and services, buybacks send 2 signals to shareholders :
a) we have excess cash which we have decided NOT to share directly with you in the form of dividends ( because your BoD knows better than you the shareholder how to use these funds.)
b) we think that of all the uses of cash we can make , buying our own shares is the best approach ( if that is not arrogant and self-centered what is it ?)

The truth is that buybacks are really a protective mechanism to put a floor on a plummeting share price. It seldom does. If that is the case, why do companies do it ? More importantly, because it is paramount to manipulating a stock's price ,why is it legal to do ??