Post #15936 by elann on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤

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And even when it's done well, the value increase is pretty negligible...even buying back 5% of all shares at an average discount of 10% to fair value only increases the value of a remaining share by 0.5%. Be still my heart. And that's a very optimistic case: beyond Berkshire and a few others, most buybacks are done at prices considerably above the fair value of a share, because profits and excess cash and share prices tend to rise in sync during boom times.

It’s worth noting that most share buybacks are part of a more nefarious scheme. The shares that are bought back are not retired. They are handed out to board members, executives, and employees, when they exercise their incentive stock options and ESPPs. So the main purpose of the buybacks is to create the illusion that handing out piles of shares as employment compensation doesn’t dilute shareholders’ positions.

Elan

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