Terry Smith launches an attack on share buybacks

MAVERICK investor Terry Smith attacked share buybacks as a tool to destroy shareholder value and called for a review of their use yesterday.

Smith, an outspoken financier who launched fund manager Fundsmith last year, attacked the practice of using buybacks to raise companies’ earnings per share figure by cutting the number of shares in circulation.

“Most share buybacks destroy value for remaining shareholders,” he said.

“Simply by executing a share buyback rather than paying out dividends, companies can inflate their earnings per share and are almost universally seen to have created value for shareholders when mostly they clearly have not.”

Smith, who is also chief executive of broker Tullett Prebon, called for more analysis of the causes of share buybacks.