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Let’s take a moment to reflect on the benefits of share buybacks. That might sound like a wonky concept, but it’s important. Buybacks shrink the number of shares outstanding, raising the value of the stock that remains. Lately, as AI worries have battered tech stocks, several companies have unveiled expanded buybacks. The latest example is Pinterest, which revealed Tuesday that longtime shareholder Elliott Management had agreed to invest an additional $1 billion in the online scrapbooking firm to fund an expanded share buyback. Including share purchases financed from Pinterest’s existing cash reserves, the company will buy back a total of $2 billion in the first half of this year, it said.
As its market capitalization was just $11.6 billion as of Monday night, that theoretically means Pinterest could shrink its outstanding shares by about 17% in a six-month period. (As the share price will rise during the buyback, though, the impact is likely to be a little less.) That’s a gutsy signal on the part of Elliott and Pinterest, indicating their confidence in the company’s prospects despite uncertainty caused by AI. Pinterest stock has lately fallen to its lowest point since the pandemic market crash of early 2020. (More on this, see here and here). The news sent Pinterest stock jumping 9%, although at Tuesday’s close of $19.10, it’s still well below where it was trading as recently as January.
Pinterest isn’t alone in taking this tack. Software companies hit hard by the “SAAS-pocalypse” also have been active on the buyback front. Last week, Salesforce announced a $50 billion buyback, and a few weeks before that, ServiceNow unveiled a $5 billion buyback, including an “imminent $2 billion accelerated” repurchase.
Lots of tech companies have buyback programs in place, of course, although many of those aim primarily to offset dilution caused by stock compensation. Those efforts are noteworthy more for what they say about stock compensation—that it incurs a real cash cost, undercutting those companies and Wall Street analysts who like to pretend it isn’t a “real” expense. But the big ones lately unveiled reflect companies’ desire to buy their stock when it’s cheap—the only time they should be buying—and to send a signal to the rest of the market. The strategy deserves more attention.
Meta’s New AI Org
Uh-oh. This doesn’t look good. The Wall Street Journal broke news today that Meta Platforms was creating yet another AI engineering organization, this time reporting up to Meta Chief Technology Officer Andrew Bosworth. That means it’s quite separate from the main AI group overseen by Alexandr Wang and Nat Friedman, both hired last year as part of Meta’s high-priced AI recruiting raids.
It’s always a bad sign when you see a big company create differing groups dedicated to essentially the same purpose: It smacks of warring fiefdoms and internal dissension. In December, The New York Times reported that Wang had told people he disagreed with Bosworth and another top Meta executive, Chris Cox, on whether he should be focusing on AI to improve the business or to catch up to leading AI models from other companies. You could interpret today’s news as Meta resolving those differences by creating a second AI team. Whatever happened to CEO Mark Zuckerberg’s efficiency drive?
In Other News
• Apple announced a new MacBook Pro powered by the M5 Pro and M5 Max chipsets, the latest in a slew of new hardware products it has unveiled this week.
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