Thread regarding Wells Fargo & Co. layoffs

The Pros and Cons of Stock Buybacks for Investors

Public companies often buy back large blocks of their stock typically when share prices are low. But it’s not always a big plus for individual investors. Here's a look at some of the pros and cons of stock buybacks:

Pros of stock buybacks for investors

1. Boost in share prices: Stock buybacks can offer a short-term bonus for investors.
2. Rising dividends: Sometimes the company will be able to increase dividend payment amounts after a buyback because there are fewer shares on which the company must pay a dividend. Not the case at Wells Fargo
3. Better earnings per share: When public companies announce profits, they track their progress in part by looking at earnings per share. With fewer shares trading, the EPS number usually rises. This can help the company beat market expectations for their performance and help drive a higher stock price. Stock Price and EPS manipulation
4. Less excess cash: If a company has bundles of cash just sitting in a money market account, that money isn't doing much for the company. Removing the cash from the company books can lift overall performance. Money would be better spent enhancing technology, attracting talent and improving long-term sustainable growth
5. Positive psychology: When a company buys back stock, investors usually see it as a sign the company believes the price should be higher, that investors are not realizing the company's true value. This can sometimes kick off an upward swing in stock price. Mislead investors and manipulate stock price

Cons of stock buybacks for investors:

1. Poor predictions: While the idea is for companies to buy up their stock when it's cheap, often that doesn't happen. Companies often end up buying their stock at what turns out to be high levels, making the buyback a bad use of capital.
2. Poor use of capital: When a company is spending millions buying their own stock, a savvy investor should ask: Why can't they find something better to do with their money?Every dollar used to buy up stock is a dollar that isn't ramping up marketing, developing a new product, investing in company technology, or otherwise investing that money to grow the business long-term.****
3. Management self-interest: Stock buybacks often benefit big shareholders the most; and frequently that means company managers who hold stock options. When the buyback boosts the stock price, often temporarily, that rise may help the stock hit a target price the managers need to exercise their options. The managers can then quickly resell their stock and pocket their profits. So company management is enriched, while the company's research and development, marketing, hiring, and other departments are impoverished by the move. Managers may also benefit from a buyback because their bonuses may be tied to hitting a particular earnings-per-share figure. Fewer shares mean a higher EPS number.
4. Cover for stock handouts: If a company is issuing tons of stock options to managers, a stock buyback helps counter that by reducing the number of shares on the market. Otherwise investors might see noticeable stock-price dilution. The buyback can help distract investors from the fact that excessive stock handouts are taking place.

Some people understand the yield curve and deposit betas, others don’t and pull out the ol’ “stock buybacks are bad and always apply to every situation” angle.

I wonder if a rebrand is eventually in our future. Might also be necessary to clear the asset cap; no politicians or government officials (on either side of the aisle) want to have their name’s plastered on headlines as being among those who helped get us off the hook. With a different name maybe it gets a little easier, most Americans don’t pay close attention to this stuff. Heck, the only people who will even notice outside of the finance world are our current customers (who’ve stuck with us for some reason up to this point regardless) and Bernie bros, who would never dream of banking with us regardless.

BAC is hovering around 52 week low too. Sometimes it's not about individual stocks. It's about mutual funds, market, etc. The bank mutual funds are taking a hit, which I'm sure WFC is including almost all of them.

I believe CS is selling WF. The respected WF ceased with Norwest purchase, its been an empty shell since.

Actually, Norwest bought Wells Fargo and kept their name. Much like First Union bought Wachovia and kept their name.

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I believe CS is selling WF. The respected WF ceased with Norwest purchase, its been an empty shell since.”

Sell to whom? Zero chance regulators would allow it to be acquired by another big bank or Wall Street firm. Even a super regional like US Bank would be way to big to combine.

Or do you mean he will sell it off bit by bit?

The 9 bill shelf offering launch doesn't help any.

Banks have been treading water for about 5 years while at low rates, zero chance they can actually grow their share price until this recession happens and passes.

I believe CS is selling WF. The respected WF ceased with Norwest purchase, its been an empty shell since.