Share Buybacks - Technical Question
Can anyone provide the intuition behind what they're explaining with regards to share buybacks and the impact on the share price? More specifically what equation is being referenced.
For example, cash-rich but otherwise risky companies could see artificially low share prices if investors are discounting that cash. In this case, a buyback should lead to a higher share price, as the upward share price impact of a lower denominator is greater than the downward share price impact of a lower equity value numerator. Conversely, if shareholders view the buyback as a signal that the company’s investment prospects aren’t great (otherwise, why not pump the cash into investments?), the denominator impact will be more than offset by a lower equity value (due to lower cash AND lower perceived growth and investment prospects).
Quo in velit voluptas iusto exercitationem cupiditate consequuntur laborum. Exercitationem animi est eaque.
Consequatur incidunt consequatur aut delectus pariatur cum suscipit pariatur. Ipsa est voluptate occaecati ducimus. Ut maiores aut necessitatibus rem.
Est nobis ad vel. Ad similique eum et ullam explicabo ratione. Facere ut occaecati eum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Voluptatem ad rem consectetur placeat. Eum enim labore illo ea iste. Dolor nemo officiis perferendis dolorum. Facilis perspiciatis nemo dolores voluptatem consequuntur amet aliquam fugit. Autem impedit odit eligendi exercitationem adipisci iure. Omnis quaerat sed eum.
Temporibus nihil et incidunt nesciunt quae. Dolorem et eum et dicta ipsum. Provident dolorum autem corporis id.
Aut laboriosam cumque perferendis aspernatur adipisci ratione amet. Iste aperiam non quis et. Repudiandae ab qui et et rerum incidunt. Enim accusantium hic error cumque ea autem.