I hate stock buybacks. I think they are a sign that management has no idea what to do with their hard earned cash flow. In Chevron's case, cash flow created by prior leadership. I get the argument that if you can get a higher return from stock appreciation than the investment options, they make sense. However, when you have been buying back millions - may billions of dollars worth of stock and the stock price is middling, at best, what gives? Legacy projects create legacy cash flow - some, not all. Stock buybacks, by my read, have destroyed value because they have kept us from investing in, and worse, pursuing, legacy opportunities. What say you?
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We have ten years of reserves, give or take. That is more than enough for the energy transition. MW wisely recognized we are now a Harvest mode industry and company. Cut costs, max returns, stay safe.
Stock buybacks were illegal until the Reagan administration and still should be.
They are a way for executives to stuff as much money in their pockets before they vacate all while stealing from the future value of the company.
Stock buy backs are also used as a way to store money for a future acquisition. The money spent on stock buybacks is a tax savings because Chevron does not pay taxes on the money gained from profits. Do they decrease tax and store money until they need it for an acquisition. It lowers the risk of exploration costs if you buy a company with identified reserves. You know what’s in the ground before you buy it. Ka-Ching!
I wish we could take the company private.
@ah the alternative is that if they use the capital raised by the stock issuance to generate more value, the stock price will also remain steady or increase. That’s what growth equities do, which oil and gas generally doesn’t fall under, which I think is basically the point OP is making.
Chevrons not issuing stock to raise capital for MCPs that will increase value and therefore share price anymore.
Most people do not understand stock buybacks. This isn't a situation where they are buying all back and taking the company private. If you look at the total number of outstanding shares over time you see that it remains steady. Nobody bats an eye when companies borrow from a financial institution and pay it back.
The way it works is say a company needs a million dollars for a project. They can either borrow the money from a bank, or they can borrow it from individuals by issuing stock. Then they can either pay the bank back or pay the individuals back by buying back the stock. There are consequences for not doing these things. Obviously if you don't pay the bank back, they are going to come after you but if you don't buy the stock back you are going to dilute the share price (same pie is now cut into more pieces). Because a company consistently buys back that extra stock it doesn't really hurt the share price too much when they issue more as investors expect it to be bought back (they watch trends). If they didn't buy back those 'extra' shares the price would start dropping.
I say … go to business school.
they dun destroy value for those with stocks options in the company