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How do stock buybacks help prevent bankruptcy?

• phendrenad2 6y ago
  Sometimes businesses need to borrow money, a stock buyback signals to banks "we are confident in our future that our stock will be worth more in... the future"
  • jklein11 6y ago
    This seems counterintuitive to me, especially when a company is near bankruptcy. Are you saying that a company who is facing insolvency decides that the best thing to do with their cash is to buy shares of their own stock. Future creditors will look at that as a signal that they will be able to make their payments? Wouldn't it be a better show of confidence to fund the projects they are asking creditors to finance themselves? I'm not disagreeing that stock buybacks are an effective tool and that they can benefit employees. I just don't see how they are helpful for companies facing bankruptcy.