Are open-market share buybacks a good use of a company's capital?

Mitchell Green · Mar 7, 2026

Companies with discipline on share count — like Larry Ellison's levered recap of Oracle, borrowing to buy back huge amounts of stock — are powerful, because market cap is shares times price and too many companies ignore the share-count side.

Buying back stock with free cash flow concentrates ownership and supports the share price.

Scope: notes Lead Edge is not an activist shareholder

22:02 20VC: Why the SaaS Apocalypse is BS | Why China Will Win the AI War | Why 50% of VCs Should Not Exist and are Tourists | Why Stock-Based Comp is the Hidden Sin of the Valley with Mitchell Green, Lead Edge Capital

Avishai Abrahami · Jul 13, 2026

Companies that continually dilute shareholders by issuing shares to employees should balance that with buybacks when they can, since a buyback is effectively another way of paying a dividend to all stockholders

Ongoing issuance creates dilution that needs an offsetting mechanism, and buybacks return value to all holders

Scope: framed as personal opinion; self-described non-expert on stock markets

25:56 20VC: Wix's Founder on What Wall St Gets Wrong About AI and Wix | Will Base44 Win the Vibe Coding Wars | The Truth About the Economics of Vibe-Coding | The Buyback Disaster: Lessons Learned with Avishai Abrahami

Mitchell Green · Mar 7, 2026

Companies should be buying back stock, and investors should question those that aren't; heavy buybacks or founder buying make him materially more bullish on a company.

Insider and corporate buying signals conviction — though you must also weigh how much stock the CEO already owns before reading a small personal purchase as a signal.

Scope: a CEO's small purchase means little if they already own hundreds of millions of stock

22:51 20VC: Why the SaaS Apocalypse is BS | Why China Will Win the AI War | Why 50% of VCs Should Not Exist and are Tourists | Why Stock-Based Comp is the Hidden Sin of the Valley with Mitchell Green, Lead Edge Capital

Gokul Rajaram · Mar 16, 2026

Buybacks reflect both genuine internal confidence and the need to signal it externally, but only very large buybacks — and especially founder-level personal buybacks — carry real signalling value.

A founder putting their own money in signals more than the company doing it; small buybacks do not convey confidence at scale.

Scope: scale matters — a $2bn-type buyback versus a token one

20:28 20VC: The 8 Moats of Enduring Software Companies: How to Analyse for Durability and Defensibility in a World of AI | Why Dropouts are "AI Maxing" the World & Remote Early-Stage Companies are Dying with Gokul Rajaram

Dominik Richter · Dec 1, 2023

One of HelloFresh's share buybacks, executed well above today's share price, was his worst capital allocation decision on IRR terms — though it may still prove good long term because the point was reducing share count to grow free cash flow per share, not supporting the stock.

Judged on IRR eighteen months to two years later it looks poor, but buybacks should be judged on long-run free cash flow per share rather than near-term price.

22:39 Judge buybacks by long run free cash flow per share not near term irr

Adam Foroughi · Apr 27, 2026

AppLovin's buyback worked because it targeted known sellers on a flimsy post-COVID-IPO cap table rather than buying float from the open market, removing the selling overhang

Going public during COVID meant they never built a blue chip investor base, so the cap table was the private cap table that needed to sell; buying those shares back directly removed inevitable selling pressure and let them attract the right investors as the business accelerated

56:12 Buy back from known overhang sellers not the open float

Adam Foroughi · Apr 27, 2026

Simply buying your float back on the open market is usually a bad bet and can rapidly burn the capital a company has earned

Operators running businesses aren't day traders, so if you mistime the buyback you destroy capital and end up in a much worse position

58:34 Open market buybacks are a bad market timing bet

Avishai Abrahami · Jul 13, 2026

Wix's buyback was a sensible use of capital: the company had excess float and over a billion dollars of idle cash it wasn't going to spend on a major acquisition, and the stock was very low

They were focused on the new product and Base44 and could not absorb another acquisition, so holding the cash made no sense

24:56 Idle cash with no acquisition capacity justifies a buyback