Biden's stock buyback tax led companies to borrow more money: Brian Reynolds

Summary

Brian Reynolds of Reynolds Strategy argues that stock buybacks have been the biggest driver of US equity prices since the pandemic and that prior attempts to tax buybacks led companies to borrow more rather than stop repurchasing shares. He warns that government pressure to halt defense buybacks and dividends is capital-unfriendly and could lead to inferior outcomes for the defense industrial base. Reynolds also suggests that defense companies like Lockheed Martin could become take-private candidates if buybacks are blocked, and questions whether SpaceX would go public under such restrictions.

• Buybacks are described as the biggest driver of US stock prices since the pandemic.
• A previous buyback tax led companies to borrow more and continue buybacks.
• Government threats to halt defense buybacks/dividends are viewed as capital-unfriendly.
• Capital-unfriendly policies could lead to inferior defense industrial outcomes.
• Lockheed Martin is mentioned as a potential take-private/LBO candidate.
• SpaceX's potential IPO is questioned if buybacks are restricted.