TL/DR –
Entrepreneur Mark Cuban expressed his disapproval of share buybacks in a 2022 interview, claiming they unfairly reward those who sell their stock rather than those who retain it. He suggested that the long-held belief that share buybacks offer a tax advantage for shareholders is no longer true. Cuban also stated that he supports the introduction of a 1% tax on share buybacks as proposed in the Inflation Reduction Act.
Mark Cuban Shares His Opinions on Share Buybacks
Entrepreneur and investor Mark Cuban recently voiced his views on business and investment, specifically his opposition to share buybacks in a 2022 interview.
What Happened
Public companies often offer stock dividends and share buybacks as a reward to shareholders, with each having distinct tax implications that can increase the stock price. During a CNBC segment on the Inflation Reduction Act, Cuban expressed his thoughts on a proposed 1% tax on share buybacks.
“No one is a fan of more taxes, but of all the taxes you’re trying to create, I think a tax on buybacks is a good idea,” Cuban stated. He believes companies need to weigh the decision between share buybacks and dividends to benefit shareholders.
According to Cuban, the previous belief that share buybacks provided more tax advantages for shareholders is no longer valid. In his view, share buybacks benefit those exiting the stock rather than loyal shareholders.
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Why It’s Important
Cuban’s comments followed a tweet in which he stated that share buybacks aren’t typically beneficial for most employees. He argued that companies should buy back shares from employees to eliminate pricing risk, rather than rewarding shareholders looking to sell.
While stock buybacks can increase earnings per share and indirectly benefit shareholders by reducing outstanding shares, Cuban believes there are misaligned incentives with the board and stakeholders.
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