Corporate America has once again proven itself to be the full mask-off villain it’s lampooned as: After a memo found that Microsoft was preparing to lay off another 650 employees from its gaming division last week, the company announced this week that it will be spending $60B of its own money to buyback some of its own stocks.
In addition to the buyback announcement, which has no expiration date and can be cancelled at any time, the company also announced that it will increase its dividend payout by 10 percent. These reveals ended up seeing the stock raise by two percent on Wall Street and by 0.8 percent on Nasdaq early Tuesday morning.
For those who might be unfamiliar, a buyback is a practice in which a company purchases some of its own outstanding stocks, which in turn artificially limits its availability and thus increases the value of shares that are already being held by investors. Buybacks used to be illegal until the US Securities and Exchange Commission enacted a rule that allowed the practice in 1982, and when paired with a 2017 corporate tax cut bill, all of the proposed saved money ended up primarily going to executives and shareholders.
We hasten to point out that Microsoft isn’t the first to use this avenue of investor board enrichment: Last year, Sony laid off eight percent of its workforce following a $1.5B buyback, and a year before that an investor group tried to get others on the board to rip Daybreak’s EG7 into pieces and, among other things, re-list it on the US Stock Exchange so it could benefit from buybacks.
They fired 650 people a week ago. This should be illegal!
— Tokyo James Show (🔜) (@theswweet.bsky.social) September 16, 2024 at 6:35 PM
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