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Let's say corp XYZ has 100 shares out, and they're owned by 50 people. At any point, there are people trading, buying and selling those 100 shares. Buyer 51 co

Let's say corp XYZ has 100 shares out, and they're owned by 50 people. At any point, there are people trading, buying and selling those 100 shares. Buyer 51 comes along and wants to buy a share. He can only buy a share if one of the 50 owners are selling. So, he has to offer a price that'll convince one of the 50 to sell. XYZ Corp decides to do a buyback. They buy 20 of those shares. In that moment, they will certainly create a spike in demand for the 20 shares. But later on, now there are only 80 shares out. When buyer 52 comes along to buy a share, there are fewer shares, and fewer sellers. He might have to offer more than Buyer 51 to actually get a share for that reason.

robertlagrant 3y ago
That's not pumping stock, though, right? Pumping stock is artificially increasing the number of buyers, for a short period. You're describing reducing the number of sellers. Which may increase the price, or may not.
- thehappypm 3y ago
  You could argue that the buyback itself, like the moment where the company actually buys the shares back, is a pump moment. they could have the demand far outstrip the typical demand in the moment. But long-term, the price should be higher as they have decreased supply.
tzs 3y ago
> But later on, now there are only 80 shares out. When buyer 52 comes along to buy a share, there are fewer shares, and fewer sellers. He might have to offer more than Buyer 51 to actually get a share for that reason. By buying that one share buyer 52 gets ownership of 1.25% of the company. Buyer 51 only got 1.00% of the company when they bought their share. You need to take that into account when comparing share prices.