Buybacks get lots of bad press. Driven by low interest rates and a perceived lack of investment opportunities, American public companies spent $1.5 trillion buying back their own stock between 2013 and 2015. Critics claim that buybacks are the worst type of financial engineering, designed to prop up a company’s stock in the short term. They say the money could be better used to invest in future growth to fund research and development, capital expenditures, and marketing. Proponents claim that buybacks are efficient ways to return capital to shareholders, who can make their own capital allocation decisions, rather than allow capital to build at corporations faced with limited investment options.
