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Not exactly, because share buybacks are optional. A shareholder can decline to participate, increasing their stake in the company (meaning the investor believes
by nmfisher 6y ago
Not exactly, because share buybacks are optional. A shareholder can decline to participate, increasing their stake in the company (meaning the investor believes that the net present value of the shares is higher than the price offered under the buyback).
It’s not common, though (and for the purposes of the comment you responded to, the distinction isn’t relevant). If management are saying “we can’t think of anything to do with this money”, most investors won’t disagree with them.
- Thorrez 6y agoA shareholder can also reinvest dividends. Doesn't that accomplish the same thing as not participating in a buyback?
- nmfisher 6y agoOnly if the company allows them to (or is simultaneously raising capital). Also I believe (though not 100% sure, depending on where you are) that income tax is paid on dividends, irrespective of whether you subsequently reinvest.