By mid-September, US companies had announced plans to buy back about $114 billion of their own shares, about two-thirds the amount announced in all of 1996, and one and a half times 1994’s total, according to Securities Data. But while such buy-backs have been viewed as a bullish signal for the past few years, they are now increasingly viewed as little more than elaborate sleight of hand designed to con investors. If they’ve artificially boosted the stock market, as many now suggest, might the enormous overhang they are creating also trigger its fall?
Market strategists who once promoted the technique say they are now often tax gimmicks that can conceal an endeavour much costlier to existing shareholders – the issuance of stock options as employee compensation.
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