Securities fraud
By John Schroy, on November 4th, 2006 |

A basic principle of US security law is that material misstatements and omissions of fact in connection with the purchase and sale of any security are violations to be sanctioned.
Corporations have argued that stock buybacks are equivalent to dividends. This article explains why this is not true and why suggesting buyback-dividend equivalency may constitute fraud.
Stock buybacks
By John Schroy, on November 3rd, 2006 |

Trial lawyers are showing interest in the apparent conflict of interest when insiders use stockholders’ money to buy back shares on the theory that they are undervalued, and at the same time are unloading their own shares.
Legal action in this direction could threaten the equity market, given the importance of stock buybacks in keeping prices up.
If stock buybacks were to cease, for any reason, the market could crash, which might wake the SEC from its slumbers.
Q2 2006
By John Schroy, on October 6th, 2006 |

Net share repurchases by nonfinancial nonfarm corporations ran at an annual rate of $554.8 billion, about the same level as in Q1 2006 and more than ten times the level of 2001 and five times the level of 2000, the peak of the Great Bubble. Amounts paid to exiting shareholders (including holders of executive options and short sellers) exceeded amounts paid equitably to all shareholders as regular dividends by 44%.
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