Post
Topic
Board Economics
Re: Companies pumping their own stocks with borrowed money, what could go wrong?
by
efreeti
on 12/05/2015, 04:37:01 UTC
If you can borrow at close to 0% rate to do whatever, wouldn't you do  the same?

When it is payback time, companies will discover that it is not easy. If there is a stock market meltdown, issuing equity won't be easy. Stockholders won't like companies cutting dividends either.

If the rate is low, there is no reason to pay back. Dividend is always slightly higher than interest rate for a stable company, less equity out there means less dividend to pay.