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Buying back shares doesn't raise the stock price because it doesn't change the underlying fundamentals. If the stock goes up after a buyback, it only stays up
by amorphid 15y ago
Buying back shares doesn't raise the stock price because it doesn't change the underlying fundamentals. If the stock goes up after a buyback, it only stays up if there was a reason other than a share buyback.
- ikono 15y agoIf you don't overpay for the shares, your enterprise value should be the same or slightly higher. So market cap should be flat to slightly higher but there are fewer shares outstanding so price per share would go up. When buybacks don't increase share price, by definition market cap must be decreasing.
- amorphid 15y agoThe market cap goes down. The company has less cash, and that cash was priced into the market cap. If you yourself had a a market cap of $25 including the $5 in your wallet, giving away that $5 would lower you market cap to $20.