Salesforce issues $25 billion in debt to buy back stock. Should we be concerned?
Raising debt to repurchase shares is a move that deserves scrutiny.
Entity Intersection Graph
No entity connections available yet for this article.
Original Source
In this article WSM Follow your favorite stocks CREATE FREE ACCOUNT Marc Benioff, chief executive officer of Salesforce Inc., speaks during the 2025 Dreamforce conference in San Francisco, California, US, on Tuesday, Oct. 14, 2025. Michael Short | Bloomberg | Getty Images Salesforce announced this week that it executed the first steps in its debt-fueled $25 billion accelerated stock buyback plan. That's half of the bigger $50 billion repurchase authorization approved in February. Raising debt to repurchase stock is a move that deserves scrutiny. After all, equity comes with neither the financial obligations nor the consequences of issuing debt. If a company misses a stock dividend payment, it doesn't look good, and the stock will get hit. However, there are no legal consequences or claims to be filed. If a company defaults on debt, it will face legal issues and claims from bondholders. We know why Salesforce wants to repurchase stock — management believes that last month's brutal sell-off on AI disruption fears has made the share price attractive — because, as CEO Marc Benioff said in Monday's press release: "We are so confident in the future of Salesforce." (Salesforce insiders are also buying. Board member and Williams-Sonoma CEO Laura Alber purchased about $500,000 worth of Salesforce stock on Thursday, and David Kirk, also a director and former chief scientist at Nvidia , picked up roughly $500,000 worth of Salesforce stock on Wednesday.) So, why is Salesforce issuing debt to buy back stock? Part of it may be that Benioff and company want to conserve cash. But mainly, it comes down to the cost of equity versus the cost of debt. CNBC Investing Club Reporter Paulina Likos and I actually touched on this concept briefly in a recent video about discounted cash flow valuation modeling. While the video was more focused on terminal value, we did cover the concept of a discounted rate, or the required rate of return an investor demands for investing in a given security. ...
Read full article at source