[scyclow]

The math here doesn't really work out for a couple reasons.

First... sure, if you spend $500,000 on buybacks instead of paying dividends, then large shareholders might make trillions of dollars. But individual investors make money also. In fact, every shareholder will make money in proportion to how much stock they own! The little guy isn't really getting screwed here.

Second, the stock price is determined by supply and demand. Stock buybacks increase the price by reducing supply. But, if we take the example mentioned where the company blows its entire bank account on stock buybacks (thus, harming the actual business)... the stock becomes less valuable, demand goes, and the price goes down.

Stock buybacks are functionally the same as if the company pays a dividend, and then every shareholder decides to reinvest. Except doing it as a buyback is (I believe) more tax efficient since the investor doesn't get hit with income tax before the reinvestment.