Originally Posted by
Tranquility
In all honesty, a buyback is a waste of capital and a slap in the face of a labor group that needs a raise. Let me explain;
A buy back reduces the float of stock available thus making Spirit stock more scarce and thus making it more valuable. It’s a noble goal; management appeasing large shareholders, especially if the stock buybacks are initiated when the stock is relatively cheap and, in the case of our company, not in the $60-$80 range when they blew their first $300,000,000!!! In short, stock buybacks are unreliable in delivering shareholder return on capital invested. It is completely dependent on the general market mood (can’t fight overall trends), and dependent on the timing of the buybacks, AND MOST IMPORTANTLY, that the shareholders actually realize those gains by selling the stock. One doesn’t make money till they sell......
Dividends/payouts/royalties are the REAL return to shareholders. Cash in hand speaks volumes!!
Dividends are just forced sale of stock. As a shareholder I don’t want a dividend. The biggest reason is it shows the company has zero ideas to make additional money on their own and shows they’ve thrown in the towel trying to grow. This is bad news. A stagnant company might as well be a bankrupt company as far as pricing metrics go (according to Wall Street).
In general I do not support share buybacks, as generally they are a poor use of capital. I would rather see the money in the bank as it kinda sorta has the same effect on valuation. That being said Wall Street really only cares about earnings growth, and the way to juice that is reduce shares outstanding.
I do however support some share buybacks and in the case of Spirit stock, which is IMO way undervalued currently, would definitely support that decision.