do stock repurchases: basically a way to launder money by evading taxes. the long and short is that instead of paying shareholders $100 via dividends, which are taxable dividend income, the co spends $100 to buy the shares (say 50 shares at $2 each). if the shares were purchased for $1 each, then the basis increases by $1, so the it only creates $50 taxable income.
edit: mistake
What am I missing?
so they'd pay half the taxes in this case - you can plug in different numbers to see a different effect, e.g. $50 purchase => $60 buyback across $1mil dollars. i probably should have done this for clarity's sake.
Repurchasing stock is more or less accomplishing the same thing, but by purchasing shares back from the market instead of just giving the money to shareholders. This makes their shares more valuable — but has different tax implications.
Both are ways to return profits to shareholders, and are activities usually done by mature businesses and not growing ones. (The reason a business returns money is it doesn’t know how to successfully reinvest the money.)
Most companies that do not return money through dividends or stock buy backs are eventually pressured to do so by activist investors / hedge funds, even Apple. The only company which has managed to resist this is Amazon which is famous for cross-financing to enter a market and then totally dominate it with the funds from profitable parts of the company (e.g. AWS). It only works because Amazon stockholders in general know that this is the secret sauce behind Amazon's entire business model.
Stock repurchases are a company buying stock back from shareholders, sometimes at higher than market value. Often these are seen as paying off investors similarly to non-reoccurring dividends. Sometimes companies do it move ownership back towards employees (by moving it back into benefit pools), but it's often as not these days that it just goes into executive salaries or board golden parachutes.
