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I don't think this is accurate. When a company buys back shares, the shares are retired increasing the ownership percentage of the remaining shareholders. It i

• knughit 11y ago
  What's not accurate?
• wlievens 11y ago
  Well in theory, if your shares are diluted /2 but the company's capital is x2, and all that capital is used efficiently, you have not lost anything either. Half slice of twice the pie.
  • baus 11y ago
    That makes sense. It is true the shareholders will own a bigger piece of a smaller pie.
• cecilpl 11y ago
  Right. The remaining shareholders own a larger percentage of a company that now owns less cash. Say the only thing my company owns is a bank account with $100 in it. There are 5 shares outstanding worth $20 each. The company buys back one share for $20, so now there are 4 shares outstanding in a company that owns $80.
  • djrogers 11y ago
    People don't invest in companies that merely have cash. Growth and recurring revenue are more important metrics to most
    • lyncnshare 11y ago
      It depends on the industry. Some stock valuations show that investors in certain industries like companies to hold on to cash reserves. This is especially true in the technology space where investors want companies to be able to cash in on the next big thing. Utilities, though, see their stock punished for holding onto excess cash.
    • pzone 11y ago
      OK, but if the company held $50 in non-cash assets and $50 in cash, the same logic would hold. The "growth and recurring revenue," stuff you're talking about is just an asset pricing restriction, which requires that the $50 in non-cash assets are not affected by moving some cash off the balance sheet. This holds if the company does not face cash constraints. (Like Apple.)
• maxerickson 11y ago
  Both situations are equity+cash=equity+cash. The ownership percentage is hidden inside the equity.