Uploaded May 2020 | Updated September 2026, 2 hours ago

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A significant talking point with respect to many of the companies that are now seeking government assistance is this: aren't we in a bit of a moral hazard situation in light of the fact that they engaged in debt-fueled share buybacks when times were good (thereby ensuring that many of their decision-makers who just so happen to also be shareholders did well), yet ran to the government when things turned sour?


To ensure that we engage in such debates armed with knowledge, understanding share repurchases is a must. Believe it or not, there are indeed many legitimate reasons why companies can choose to buy back shares, reasons which aren't in let's say moral hazard territory.


To put it differently, this video explains that stock buybacks are tools and nothing more, therefore not inherently good or bad: it all depends on how you use them. If used in an ethical manner, share buybacks make perfect sense. On the other end of the spectrum, however, they can most definitely be used for all the wrong reasons and unfortunately, this has been happening quite a bit over the years :(