4 ms·
they reduce the supply of stock available, that is a difference. If its material is a different question, I'd argue it is but don't have data to back that up.
by gmm1990 3y ago
they reduce the supply of stock available, that is a difference. If its material is a different question, I'd argue it is but don't have data to back that up.
If a company has to buy back 10 billion in stock over a fixed time period market participates should be able to drive up the stock price knowing they will have a buyer (the company) to sell to later.
- nabla9 3y agoLets go this trough: Before: I own 100 stocks worth $100 each. =$10000. Option 1: 2% dividend. I have 100 stocks worth $98 each + $200 =$10000. Stock value drops immediately. Option 2: equal sized buyback: I have 100 stocks worth of $100 each = $1000. Buyback does not increase the stock value immediately. Company pays $200 for those who sell, but owns the stocks (or shareholders 'own them') so it's net neutral. This reduces the number of shares outstanding, thereby inflating (positive) future earnings per share. This typically leads to the value increasing.