Flush With Cash, US Companies Buy Own Stock

Instead of, for example, hiring
By Kevin Spak,  Newser Staff
Posted Oct 7, 2010 6:46 AM CDT
Companies would rather stash their money in their own stock than hire people.   (Shutterstock)

(Newser) – American companies are sitting on record piles of cash right now, but instead of spending it to hire more workers or increase productivity, most are choosing to buy back huge quantities of their own stock, the Washington Post reports. This year firms have announced $273 billion in buybacks, more than five times last year’s figure. “They don’t know what they want to do with all the cash they’re sitting on,” explains one researcher.

With the Federal Reserve holding interest rates at a record low, many are actually borrowing money to buy back those shares. Microsoft, for example, borrowed $4.75 billion to buy back shares, even though it has $37 billion in cash stashed overseas. “There are times when the best thing to do might well be to buy back your stock,” says one investment strategist. “There’s nothing wrong with that.” But some critics do see something wrong with that. “It’s totally wasted money,” grumbles one professor. “It does not do anything long-term for companies.”

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