VALUE: After Hours (S08 E17): Big Tech Buybacks May Be Destroying Shareholder Value

During their episode, Taylor, Carlisle, and Tweedy Browne’s John Spears And Jay Hill discussed Big Tech Buybacks May Be Destroying Shareholder Value. Here’s an excerpt from the episode:

[Jay] One thing that I’ve done is we did a little study on buybacks in the S&P 500. So this goes back to the beginning of the year, 12, 31, 2025. But at that point in time, there were 60 companies in the S&P 500 with PEs greater than 40.

And 50 of those 60 companies were repurchasing shares. And arguably those companies would be better off with PEs over 40 issuing shares. So to me, there’s a lot of value destructive share repurchase occurring.

Share repurchase meant to offset dilution or just a company saying, we’re not going to be price sensitive about share repurchase. We’re just going to repurchase X amount of dollars or shares every year, regardless of price.

[Jake] And that strikes me as- If that offended your sensibilities, then wait till you get a trillion dollar SpaceX equity issuance.

[Jay] Well, that actually could be the tipping point. I mean, one of the signs of bubbles is when there’s lots of new IPOs and there’s lots more supply of companies. And it sounds like those SpaceX, Anthropic, and OpenAI IPOs are going to have enormous valuations.

Right. And that’s a lot of new issuance, a lot of new supply. And I wonder if that could be one of the triggers to this.

I’ll call it a bubble. I think it’s a bubble bursting.

[Jake] They better hurry before inflation gets too high and the Fed raises rates and pops everything on them.

[Jay] And if the Fed is going to start raising rates again, which probably six months ago, people were thinking about rate cuts, not only in the US, but in international markets as well. And now the narrative has flipped to where rate hikes actually may be more likely. And doesn’t that work against the growth company long duration?

[Tobias] Nothing stops this train, Jay. Nothing stops this train.

[Jay] But Tobias, you know it will at some point.

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VALUE: After Hours (S08 E17): Big Tech Buybacks May Be Destroying Shareholder Value

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