Targeted buybacks outperform open-market purchases
The guest argued that generic open-market share buybacks are typically poor capital allocation decisions, whereas targeted buybacks aimed at removing structural sellers from a messy cap table can unlock massive shareholder value.
The argument
Using AppLovin's 2022 buyback as an example, the guest explained that buying directly from private-market legacy investors who needed liquidity removed a massive technical overhang, which accounted for a significant portion of the company's subsequent re-rating.
The thesis, stress-tested
✓ What validates it
- —
▸ Risks discussed
- ▸Misjudging the intrinsic value of the stock during a buyback
- ▸Depleting corporate cash reserves if the business faces unexpected operational headwinds
Hear it yourself
"And if you talk to CEOs and founders, I know you do do fairly often, these jobs are brutal. It's people these days are afraid to talk to me because I'm so busy. They perceive, even though I'm not, I'm the same person I was ten years ago, they don't come up to me anymore. Or people inside the company or outside the company, if the stock is doing well, believe you're smarter than you are. And if the stock is doing poorly, believe you're gonna be so stressed out, you might jump off a building. Like, it's you don't understand, like, the things that are going on in the CEO's mind when you you really haven't done that role yourself."
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