A number of analysts predict a crash but others go a step further. They believe that before long the stock market will be gone. How? According to them companies are buying back their stock from investors as they merge or are acquired by other [bigger] companies. When the buybacks of their stock is complete no one would be able to invest in the stock market anymore. Your thoughts? Is this likely to happen?
Will never happen. Yes companies are buying back their own stock, but often that is a fractions of a percentage of the total outstanding shares per year. And they also hand out new shares as executive compensation, to fund further expansion etc. Also no one is forced to sell, they are buying them from the market just like anyone else. Not sure what the rules in the USA are but here if one owner has over 90% (or was it 95%) of the shares, then the other owners are legally obliged to sell their shares to that owner if he offers them a valid price. (so above that of the current market value) The only time I've seen this happen is in big acquisitions.
Even though a lot of companies are now buying back their own stocks, the market will still be around for a long time to come yet. To be honest I'd be more concerned about a crash, rather than it disappearing.
Definitely not a possibility. It would be an extremely inefficient way of running your enterprise. Capital markets serve a purpose in providing additional access to capital in a way that's more efficient than you using your own. There would be all kinds of liquidity issues. The idea of every company effectively going private wouldn't make sense because you would be extremely limited financially in what you would be able to do to grow the business.
Will never happen. Company buybacks have been happening for dozens of years. And at the same time, most companies create shares for employees, for secondary offerings.. or even just for IPOs. Not sure anyone could do the math, but I would guess the total amount of outstanding shares in the US increases every year. Yes, many companies do buybacks, and some companies even manage to revert to being private companies.. but that is a tiny percentage, and just my guess, but it is a fraction of the amount of shares created.
Also don't forget, generally big and strong companies do a stock split once in a while, simply to bring down the share price from multiple hundred $$$ per share to something lower. This doesn't do anything to dilute the shareholders ownership of the company but it does double (in case of a 1:2 split) the amount of outstanding shares.
