One rationale for stock buybacks is when companies have no other productive investment available, buybacks transfer cash to shareholders, which they can use to fund other productive investments.

“Proponents of buybacks argue that corporate executives conduct buybacks when other value-creating investment opportunities are unavailable, and instead use that cash to reward shareholders in the form of share repurchases. This cash, they suggest, can then circulate in capital markets to fund productive investment in other companies and generate growth. In other words, buybacks allow companies to reward shareholders, and the cash gets recycled into investment in other companies or startups.”