Buybacks Apple v Meta & New Tax

From a WSJ article by Spencer Jakab:

https://www.wsj.com/articles/stock-buyback-repurchase-tax-2022-11668730202

Former hedge-fund manager Ben Hunt, who writes a newsletter called Epsilon Theory, notes that Meta spent almost $96 billion on its own shares over the past decade, but it gave away so many through compensation schemes that it had 12.4% more shares outstanding at the end of the period. The biggest repurchaser of them all was Apple Inc., having spent more than half a trillion dollars, but it actually was effective. There are 38% fewer Apple shares outstanding than a decade ago and it paid an average of $46.80 a share compared with today’s price of $151.

The 1% tax is modest enough that it won’t convince many companies to trim buybacks. Ironically, though, tarred with the brush of corporate greed the way the law was written makes it least likely to sway those that really could be tarred with the brush of corporate greed by lavishly rewarding executives. Only net buybacks get taxed, so companies like Meta that have huge repurchases but even larger awards won’t owe anything. At the other extreme are companies like Warren Buffett’s Berkshire Hathaway. It doesn’t give management stock options, but in 2020 and 2021 it repurchased enough stock to increase a long-term shareholder’s economic interest in its business by 10%.

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Inept, nothing to add

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Wow, so basically they spent $96 billion, that flew under the radar as stock buybacks, and still had sizable dilution, so that the actual amount ‘spent’ via giving away stock options etc … was well over $100 billion, probably mostly on compensation to employees/executives. Ballpark the last 4 years earnings.

Still looks like a heck of a company. Balance sheet is fat, massive earnings in past 12 months, with operating cash flow larger still. If the virtual reality vision plays out decently, it could be an incredible buy at these levels.

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If it’s mostly stock options at market prices, the company may have actually made money given the current price matches that 6 years ago

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That, it seems to me, is unlikely. There will be a market, but it isn’t going to be the cellphone market or the tablet market, it’s going to be a (reasonable) niche market for gamers and occasional other uses (I wore one at the VanGogh exhibit in Atlanta and it was fun) - and even if it is, there is no guarantee that Meta will be the one in control of it they way they are/were in social media.

A win for them would be to spin off the headset as a separate company giving Facebook/Zuck control, but allowing others to participate as they see fit. That would double Facebook’s share price overnight and segregate the start up costs where they should be.

For every dollar the headset took in as revenue they spent $4 to get it. Or rather Facebook shareholders spent $3 and the headset made no profit. If I knew if/when Zuckerberg will admit that his grandiose vision (and there’s no other way to describe it - he renamed the company!) isn’t working I would be back into the stock. But as it stands, I’m just not sure about it at all. (PS: the games showed a sequential drop in revenue in what should have been one of their more decent quarters, so….)

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