scrumpyjack wrote:TheMotorcycleBoy wrote:scrumpyjack wrote:I would rather their scientists were thinking up and developing such products themselves rather than paying $7 bn in goodwill for someone else's unproven idea. Eventually that $7 bn has to be written off. They've already got 35 billion euros of goodwill and intangibles in their balance sheet because they have been doing far too much of that sort of thing in the past.
I would rather their scientists were thinking up and developing such products themselves rather than buying back their own shares!
I suspect the reason they are spending it on shares, at the current relatively low price, is that can't think of anything better to employ scientists on developing new products. If that is the case, I prefer buybacks, which makes each remaining share own a larger proportion of the existing business, to blowing it on value destructive acquisitions. Too often buybacks are made at prices which, a couple of years later, look absurdly high. Though that may turn out to the the case with these buybacks
I actually think buybacks are a dreadful idea. If ulvr and others genuinely have spare cash they wish to return, in my opinion, they should pay a dividend and the recipients should pay income tax if not in tax shelter.
The rationale (by ulvr and the others) for *preferring buybacks* over dividends is perfectly clear to me: 89% of UK share ownership is in large financial organisations which would have to pay income tax, and corporations typically organise this buyback campaigns via preferred brokers etc.
Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.
Not only do buybacks lack imagination, they are corrupt too. Furthermore since ulvr has debt too, all these buybacks are doing is value-extraction not creation by moving money hopefully borrowed at lower rate than their dividend yield, and using it to redistribute their liabilities, to the benefit of large financial institutions.
Sorry about slightly snappy reply - dayjob work is frantic!
Matt
I was merely replying to one of scrumpys earlier comments