51

This is a great question. The correct answer is that a buyback of all shares is a liquidation. If there are zero shares, this can only mean the company no longer exists. Note that in normal (partial) buybacks, the company shrinks in value. The natural extreme of this is that the company disappears. If the company is undervalued on the market compared to ...


19

I found the answer in Wikipedia: if a company buys back its own share, it's called treasury stock and "Total treasury stock can not exceed the maximum proportion of total capitalization specified by law in the relevant country", so it's an actual law that forbids companies buying back all of their shares. Also treasury stock do not have voting rights, so ...


17

In fact, buybacks WERE often considered a vehicle for insider trading, especially prior to 1982. For instance, Prior to the Reagan era, executives avoided buybacks due to fears that they would be prosecuted for market manipulation. But under SEC Rule 10b-18, adopted in 1982, companies receive a “safe harbor” from market manipulation liability on ...


13

In the early 90's, the SEC issued a ruling that allowed companies to sell puts on their stock for the purpose of buybacks. The short puts don't necessarily assure the company that they will acquire shares because if share price rises, the puts will expire worthless, generating some income, and the buyback isn't accomplished. OTOH, if share price falls, ...


7

I think JB King's answer is interesting from the point of view of "is this good for me" but the OP's question boils down to "why would a company do this?" The company buys back shares when it thinks it will better position the company financially. A Simple Scenario: If Company A wants to open a new store, for example, they need to buy the land, build the ...


6

They are similar in the sense that they are transferring money from the company to shareholders, but that's about it. There is different tax treatment, yes, but that's because they are fundamentally different. Dividends transfer money equally to all shareholders, but that also reduces the value of each share by the same amount, since it's cash out the door, ...


5

A Breakdown of Stock Buy Backs has this bottom line on it: Are share buybacks good or bad? As is so often the case in finance, the question may not have a definitive answer. If a stock is undervalued and a buyback truly represents the best possible investment for a company, the buyback - and its effects - can be viewed as a positive sign for shareholders. ...


4

A company has money. What can it do? Invest in its own operations, buying equipment, hiring employees, etc. But Apple may already be doing so much of that, that it doesn't find additional activities likely to be profitable. Invest in external operations, buying a supplier or customer (vertical integration) or a competitor or unrelated business (...


3

Something to note is that when a company announces a share buyback program there is usually a time frame and amount of shares that are important details as it isn't like the company will make one big buy back of stock generally. Rather it may take months or even years as noted in the Wikipedia article about share repurchases. Wikipedia covers some of the ...


3

Ignoring regulation, how would this actually happen? Imagine a company had a market cap of $100 million. Obviously, that market cap includes any cash on hand, so no company could afford to buy its own stock with its own money. But let's say the company first borrowed $100 million. Now it has $100 million in cash on hand and a debt of $100 million, so the ...


2

Realistically, that isn't what would happen, quite. To start, there will be insiders who hold a significant number of shares. As such, they elect a fraction of Board members. They will encourage the Board to instruct management to do stock buy-backs. These insiders do not cooperate: they do not sell their shares. As a result, with fewer total shares ...


2

A company doesn't manage itself, its shareholder do. Therefore a company cannot buy its own shares. Think of a car: what happens when a car pays its loan to the bank? What can happen instead is one shareholder buying out all the shares and becoming a single owner. This is not unheard of.


2

Companies already have to protect themselves against employees trading the company's shares with insider information. They typically do that in a number of ways: Making sure that material insider information, like business results and upcoming major transactions, is announced to the stock market as soon as possible. Establishing a general period in which ...


2

In most countries there are specific guidelines on buy backs. It is never a case where by one fine morning company would buy its shares and sell it whenever it wants. In general company has to pass a board resolution, sometimes it also requires it to be approved by share holders. It has to notify the exchange weeks in advance. Quite a few countries require ...


2

The reason for the sale doesn't matter. You sold shares. If those shares were sold for a profit, you have a capital gain, and tax due. If the shares were sold at a loss, your repurchase inside of 30 days was a wash sale, and the basis is adjusted. The loss is delayed until the next sale.


2

The short version of JB King's excellent answer is that the company will typically buy back shares from the open market at market price. Sometimes, it will specifically target larger stakeholders, even controlling interests, who are making noise that they want to divest; if such an investor were to just dump their stock on the open market, neither the ...


2

If you are offered more than the shares are worth (in your opinion) then you should sell. Do you think you will get more than 110 per share if you hold on to it? If yes, don't sell. If no, sell. What you paid for the shares doesn't matter at all.


1

In the case of Apple, they have plainly too much money to invest in meaningful ways, that is in a way that will produce profit, and doesn't distract management from their main business. They surely don't want to make mistakes like HP's Autonomy acquisition ($8.8bn write-off). They tend to buy companies only because they want what these companies make. The ...


1

The only thing you can draw conclusions about is the company's announcement of a buyback plan. Companies buy their own stock back when they feel that they have a surplus of cash, they feel that their growth is on-track and does not require a boost through spending some cash, and when they are bullish on the future of the company. Other reasons are to fend ...


1

What should I expect? Share price to raise over next 12 months and then a split? You can expect what ever you want. Share price can't be predicted


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