Let's say my company has $50 in liquid assets, the overall company is worth $100 (making the EV, "enterprise value" of the company $50, if we treat the liquid a

Let's say my company has $50 in liquid assets, the overall company is worth $100 (making the EV, "enterprise value" of the company $50, if we treat the liquid assets as being worth their face value, $50), and there are 50 shareholders, each holding one share. In this naive model, one would expect each share to be worth $2. If the company spends all its liquid assets buying out 25 shareholders at $2 apiece (prices respond to demand for shares, of course, so this toy model doesn't hold at these ratios, but ignoring that for a second), we now have 25 shareholders, each owning 1/25th of a company that's now worth only the company's EV of $50, i.e., each share's still worth $2. So no value was created, it was a waste of time. In practice, many many companies' cash holdings are not valued at par by the company's existing investors. That is to say, if the company spends their cash on something that isn't value destroying (surprisingly difficult! Many an acquisition is value destroying!), they can actually increase the value of each share by spending the money in a way that investors like. Share buybacks thus have the counterintuitive impact of raising the value of each share not by transferring money to the remaining shareholders, but by reducing existing shareholders' risk that management will misuse the company's liquid assets on some ego-driven vanity project.