With Stocks Buybacks Halted, We’ll See How Much They Matter
The $2 trillion stimulus bill prohibits companies that get government aid from repurchasing shares.
Political sentiment in the U.S. has turned so viciously against share buybacks that they may never recover. Some worry stock returns will follow suit. But wagering on the death of American equities has usually been a sucker’s bet.
Always controversial, the sight of companies blowing precious cash on their own shares has become impossible to stand at a time when the coronavirus pandemic is spurring layoffs and raising bankruptcy risk. A lasting death knell may have sounded last week, when President Trump said he didn’t like it when proceeds of his 2017 tax cut were spent this way. Now Congress’s $2 trillion stimulus proposes barring any company receiving a government loan from repurchases until a year after it’s repaid.