http://www.bloombergview.com/articles/2015-11-11/how-rich-investors-use-all-that-buyback-cash
Even liberals should be able to understand this.... Well.... maybe.....
The basic reasoning behind this was laid out nicely in the "simple dumb model of corporate finance" that my Bloomberg View colleague Matt Levine offered up a few months ago:
1. Each company is good at one thing.
2. Early in the company's life, it asks investors to give it money, which it invests in doing the thing.
3. Later in the company's life, the thing is profitable, and the company generates more money from doing the thing than it needs to reinvest in doing more of the thing.
4. The company has a choice of what to do with the extra money.
5. It can invest it in doing different things, which -- in this simple dumb model -- it is bad at. This reinvested money mostly disappears, and shareholders are sad and angry.
6. Or it can give the money back to shareholders.
Even liberals should be able to understand this.... Well.... maybe.....
The basic reasoning behind this was laid out nicely in the "simple dumb model of corporate finance" that my Bloomberg View colleague Matt Levine offered up a few months ago:
1. Each company is good at one thing.
2. Early in the company's life, it asks investors to give it money, which it invests in doing the thing.
3. Later in the company's life, the thing is profitable, and the company generates more money from doing the thing than it needs to reinvest in doing more of the thing.
4. The company has a choice of what to do with the extra money.
5. It can invest it in doing different things, which -- in this simple dumb model -- it is bad at. This reinvested money mostly disappears, and shareholders are sad and angry.
6. Or it can give the money back to shareholders.
