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I think the idea is that because there is money going out the door in a buyback, rational investors should value the stock that much lower. And this lowered val

I think the idea is that because there is money going out the door in a buyback, rational investors should value the stock that much lower. And this lowered valuation should balance exactly with the price increase due to increased demand. Not sure it works out like that in practice though.

mythz 7y ago
Investors don't get to value shares, they get to sell them and Buy Backs increases the demand for shares which pushes the stock price up in the short-term at least. A lot of the valuation of public companies are speculative based on their future potential earnings so a loss of unused capital shouldn't affect it too much, it's also a signal that the company believes their shares are currently undervalued, so they believe their Buy Backs are acquiring them at a discount.
- harryh 7y ago
  When exactly does this pushing up of the stock price occur? When the buyback is announced? When it is actually executed? Sometime in between? What if a company does buybacks on a predictable schedule over years? It seems to me that if the pushing up is as predictable as you say it should be trivial to buy a bunch of shares right before the increase and sell them right after for an easy gain. You should get on that!
  - mythz 7y ago
    > When exactly does this pushing up of the stock price occur? When the buyback is announced? When it is actually executed? Sometime in between? It depends on the size of the BuyBack and whether they're getting them at a discount, but it could go up at announcement as it could encourage other investors to buy shares early in expectation that the Buy Backs will push the price up, it will go up (depended on the size of Buy Back/Market Cap) during execution due to the increased demand. > What if a company does buybacks on a predictable schedule over years? They're only going to perform Buy Backs when they think they're at a low valuation, when they have a high valuation they'll prefer to give out dividends or employ other effective use of capital like M&A to manufacture growth. > It seems to me that if the pushing up is as predictable as you say it should be trivial to buy a bunch of shares right before the increase and sell them right after for an easy gain. You should get on that! You don't get to know exactly when Buy Backs occur, they'll announce that they intend to perform purchase a certain amount of Buy Backs over a specified period and in the next Financial results they'll disclose how many Buy Backs they purchased during the period.

mythz 7y ago

Investors don't get to value shares, they get to sell them and Buy Backs increases the demand for shares which pushes the stock price up in the short-term at least. A lot of the valuation of public companies are speculative based on their future potential earnings so a loss of unused capital shouldn't affect it too much, it's also a signal that the company believes their shares are currently undervalued, so they believe their Buy Backs are acquiring them at a discount.

harryh 7y ago
When exactly does this pushing up of the stock price occur? When the buyback is announced? When it is actually executed? Sometime in between? What if a company does buybacks on a predictable schedule over years? It seems to me that if the pushing up is as predictable as you say it should be trivial to buy a bunch of shares right before the increase and sell them right after for an easy gain. You should get on that!
- mythz 7y ago
  > When exactly does this pushing up of the stock price occur? When the buyback is announced? When it is actually executed? Sometime in between? It depends on the size of the BuyBack and whether they're getting them at a discount, but it could go up at announcement as it could encourage other investors to buy shares early in expectation that the Buy Backs will push the price up, it will go up (depended on the size of Buy Back/Market Cap) during execution due to the increased demand. > What if a company does buybacks on a predictable schedule over years? They're only going to perform Buy Backs when they think they're at a low valuation, when they have a high valuation they'll prefer to give out dividends or employ other effective use of capital like M&A to manufacture growth. > It seems to me that if the pushing up is as predictable as you say it should be trivial to buy a bunch of shares right before the increase and sell them right after for an easy gain. You should get on that! You don't get to know exactly when Buy Backs occur, they'll announce that they intend to perform purchase a certain amount of Buy Backs over a specified period and in the next Financial results they'll disclose how many Buy Backs they purchased during the period.