Mar 19, 2020 - Economy & Business

The Trump administration's 180 on stock buybacks

Photo: Chip Somodevilla/Getty Images

President Trump told reporters on Thursday he would be "OK" with a conditional coronavirus bailout that bans stock buybacks for companies that receive federal relief.

Why it matters: Trump's tax cuts set off a record-setting buyback spree in corporate America. The comments are a shift in tone, given that his deputies have defended share repurchases in the past.

What he's saying: Trump said he was "never happy" that companies were using cash to buy back stock.

  • A number of companies hard hit by the halt in economic activity due to the COVID-19 outbreak are asking for federal relief. But they’re facing criticism for how much cash they spent in recent years repurchasing their own shares.

Flashback: “Even if people buy back stock, that is money that goes back into the economy that lets investors take that money and allocate it to other things. It’s a complete system,” Treasury Secretary Steven Mnuchin said in 2018.

  • Larry Kudlow told CNBC last year that when companies buy back stock, money returned to investors and shareholders "will be recycled into the economy and they will start new companies, new businesses.”

Go deeper

Biden calls on CEOs to refrain from stock buybacks amid coronavirus bailouts

Photo: Mandel Ngan/AFP via Getty Images

Joe Biden called on CEOs on Friday to make a commitment against stock buybacks, as the country deals with the coronavirus pandemic.

Why it matters: The demand comes as an increasing number of industries have called for economic relief from the effects of the pandemic. Companies in many of those industries have come under fire for using extra funds from tax relief to repurchase their own shares in recent years.

Big Pharma is on a stock buyback spree

Data: Company filings; Chart: Axios Visuals

In 2018, the year the Republican tax law went into full effect, 12 of the largest pharmaceutical companies spent more money buying back their stock than they spent on drug research and development.

The big picture: When billions of dollars became available to the biggest drug companies, their main priority was to juice earnings, along with the paydays of their executives and investors — not investments in new treatments or relief for patients who can't afford their drugs.

Go deeperArrowMar 5, 2020 - Health

Companies hunker down for worst-case economic scenario

Illustration: Aïda Amer/Axios

What a difference a month makes.

Then: The nation's largest companies were on top of the world — buying back stock, watching their share prices flirt with all-time highs and hiring in droves.

Now: Corporate America is prepping for what could be a very lengthy and severe recession.