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DragoonXNucleon t1_j28wk15 wrote

Reply to comment by TA_faq43 in [OC] Apple’s cash flow statement visualized by giteam

Sure, its a negative flow, but think of the implication.

They spent nearly as much buying back stock as they spent running the fucking company. So where did that money go, well it went to shareholders. Ok, so who are shareholders. Well, a lot of us have small amounts but a lot of them have big amounts. Except in a buyback its not the shareholders are given payments in cash. No, instead shares are taken off market, so the singular share goes up in value? Whys it matter? Taxes. If your asset appreciated you don't pay taxes until you sell. If they just did a dividend, you would pay taxes now.

So ultimately this is a company making so much profit they can distributing it to their investors in a tax free way. Yet, their balance statements show a loss.

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redditseddit4u t1_j29niz0 wrote

A couple things to point out. #1 Apple spent about $300 billion in costs of revenue and operating costs which is more than they spend in stock buybacks. That’s not conveyed in the chart since the chart just has net income. #2 when a company does a stock buyback, they’re literally buying back their shares. ‘Normal’ tax rules apply if you’re a stockholder selling your shares back to Apple as part of their share buyback.

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Hamoodzstyle t1_j29ysiz wrote

The person selling their shares to apple is not the only one benefiting, it's also every other shareholder who now owns shares that are higher in demand and thus are worth more money.

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Obvious_Chapter2082 t1_j2bpiix wrote

The higher demand is offset by the lower total equity though. Value per share remains unchanged

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Hamoodzstyle t1_j2bq2wn wrote

Doesn't lower total equity (i.e. number of outstanding shares in the market) with unchanging valuation results in higher value per share.

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Obvious_Chapter2082 t1_j2bqfe4 wrote

The valuation does change though. Outstanding shares decrease, and the amount of total equity also decreases by an equivalent amount (since treasury stock reduces company equity). Since these 2 amounts offset, the company value per outstanding share doesn’t change

There are outside factors that could increase or decrease stock price though, it’s just that people usually conflate this with buybacks

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JesterSooner t1_j2cmn0o wrote

Well, you aren’t paying taxes on it because you haven’t profited off the increase in value yet. The profit occurs when you sell, hence the taxes.

Like if you own a baseball with Babe Ruth’s signature it will go up in value with time, but you won’t actually get any cash from that unless you sell the baseball. Let’s say you were taxed on that increase in value before selling… ok, so you pay the tax even though you haven’t actually gained any money yet. After you pay the tax, you have the ball re-appraised and find out to your surprise that the signature is fake. Suddenly, your ball is worthless and you just paid taxes for money that you never actually had. Stocks work on a similar principle because “value” isn’t the same as “profit”

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DragoonXNucleon t1_j2dqdpi wrote

Sure, its logical to not pay taxes, except its part of an increasingly common tax avoidance scheme.

Earn all money via stocks. Take out loans against those stocks. Never pay the loan back. Repeat the process and those that are uber rich never pay any taxes but have near infinite spending money.

So the rest of us give up 30% of our income and yet those who benefit from these buybacks pay 0.

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JesterSooner t1_j2ef52s wrote

What bank anywhere in the world is giving out loans that don’t get paid back?

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