Here’s the thing: if a company has 1 million dollars in cash, and a 2 million dollar market cap, and they spend the cash buying back 1 million worth of stock, the total value of the company, including the cash they spent, has decreased by 1 million dollars and the stock price should therefore not change at all.

So why should these stock buybacks consistently be boosting the share price? Either investors are stupid, or the company is intentionally paying too much for its own stock so that the CEO can get a big bonus.

I know which one sounds more likely to me.

Edit: I suppose there is a third option: maybe the CEOs were assuming the stock price would rise forever, and were hoping to cash in on the speculative bubble, which is less fraudulent but more reckless. I don’t know which one is worse.