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Financial Freedom

‘No Stock Buybacks’ Demands Trump

President Trump and Senator Chuck Schumer met this week to discuss a number of pressing issues. One of them…stock buybacks.

stock buybacks


“I am fine with restricting buybacks. In fact, I would demand that there be no stock buybacks. I don’t want them taking hundreds of millions of dollars and buying back their stock.” – President Trump


What Is A Stock Buyback?

A stock buyback or “share repurchase” is the re-acquisition by a company of its own stock. It represents a more flexible way (relative to dividends) of returning money to shareholders.

A stock buyback allows a company to re-invest in itself. The shares are re-purchased and absorbed by the company. The overall number of outstanding shares on the market is now reduced. Stock buybacks are also a way of distributing a company’s earnings back to shareholders. There are several different ways a company can do this. Stock buybacks are one of those.

When a company distributes a dividend to shareholders, earnings are paid directly to a shareholder. But with a share repurchase, the company is buying back the stock shares themselves from shareholders. The cash distributed to the shareholder for the price of the dividend is the distribution of earnings in this case.

For a full breakdown of stock buybacks, click here.

Recent News On Share Repurchases

During today’s White House Coronavirus Task Force news conference, Trump was asked about the meeting and had this to say – “We talked about [stock] buybacks. I don’t want to have buybacks. I don’t want some executive saying we’re going to buy 200,000 shares of stock. I want that money to be used for the workers and also for the company, to keep the company going. I haven’t spoken to a lot of the republicans or democrats. [Schumer and I] discussed it and I don’t like buybacks. I didn’t like them the first time.”

Schumer added this in an earlier interview – “We are not going to go for any bailouts unless they are worker-friendly. The money goes to workers, employees, and no stock buybacks—none of that is in [Sen. McConnell’s] bill. We’re going to fight hard to get them in the bill, and get it done.”

Trump’s Stance On Stock Buybacks

President Donald Trump claims he does not like stock buybacks. Instead, he says he is in favor of any  industry or company bailout to include provisions against stock buybacks. This is because he wants to make sure the bailouts are going to help American workers rather than shareholders of stock. President Trump has been heavily criticized by some for the way companies handled his tax cuts. Those companies spent much of the gains on their tax cuts from buybacks. Instead, the money could have been used to increase wages, bonuses, and benefits for its workers.

Understanding these criticisms, Donald Trump says he no longer wants to see companies who receive federal handouts to use the money for this purpose. And he is perfectly fine with companies being restricted from doing so if they receive this federal money.

When asked about the recent airline buybacks that occurred, the president had this to say – “I never liked stock buybacks from their standpoint. We did a big tax cut, and they took the money and did buybacks. That’s not building a hanger. That’s not buying aircraft. That’s not doing the kind of things that I want them to do. And we’re now talking about buybacks. We didn’t think we’d have to restrict it, because we thought they would have known better. But they didn’t know better. In some cases, not in all cases. Some people did an incredible job. They built plants all over the country. You see what has happened. Until this invisible enemy appeared…we’ve never had an economy like this.”

The president continued – “There were some companies that used that money to buyback stocks. Driving up the price of the stock artificially in many cases. I don’t like that. I am fine with restricting buybacks. In fact, I would demand that there be no stock buybacks. I don’t want them taking hundreds of millions of dollars and buying back their stock.”

What You Should Know

In this recent article, Stock Buybacks Flush Your Money Down the Toilet, income expert Marc Lichtenfeld discusses the potentially harmful behavior of many CEOs.

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