Selling shares trades dilution for cash. Buying shares trades cash for dilution. These are simply inverse operations. --- MyCorp has 10 million shares, valu

Selling shares trades dilution for cash. Buying shares trades cash for dilution. These are simply inverse operations. --- MyCorp has 10 million shares, valued at $10 each, for a market cap of $100m. Next year, its market cap grows by $15m, resulting in a per-share valuation of $11.50. --- But suppose MyCorp had first done a $5m buyback. Then it would have 9.5 million shares, valued at $10 each, for a market cap of $95m.* Next year, its market cap grows by $15m, resulting in a per-share valuation of $11.58. The shareholders' "bet" is that MyCorp would increase its market cap, even it gives up $5m of cash. In this case, the bet paid off. --- * Note that buybacks (and fundraising) change the capitalization but do not immediately raise or lower the value of the stock, in a perfect market. It if it did, it would be hard to buy/sell the stock. Rather, it increases shareholders exposure to rewards/losses later (i.e. the opposite of dilution).