Buybacks / Mkt cap question

Pepstar's picture
Rank: Senior Chimp | 25

Hi, am reading the Motley Fool guide to valuations. It says that share buybacks are good because they increase the EPS by reducing the shares outstanding. It also says that mkt cap is price x shares outstanding. But does that mean with share buybacks the market cap reduces / does mkt cap exclude value of stocks owned by the company? Surely that can't make sense as you can have a $50bn mkt cap company where the company owns 20% of it? Or not?

Thx

Comments (13)

Feb 10, 2008

Sounds like a $400K/yr associate to me

Feb 12, 2008

Pepstar:

Quit wasting people's time. Don't post here. I come to this forum to learn shit and you're playing pranks. If you want be a smart-ass, do it face-to-face.

Feb 10, 2008

Owned

Feb 10, 2008

LOL. Man this is too funny

Feb 10, 2008

How could you really post such a question after your rant about being worth a cool million dollars by 27?

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Feb 11, 2008

this is waaaaaay to funny :) thanks for making my day!

Feb 11, 2008

Dood.. you're a 1st year associate and you're reading up on valuation from fool.com. Isn't that kinda.. basic for you?

Here.. I'll give you a clue.. if EPS increases.. what happens to share price?

Feb 10, 2008

SLOW DOWN. tylderdurden, can you define EPS for him?

It reminds me of Almost Heros:

David Spade: "The capital 'B'"

Chris Farley: "ENOUGH FOR TODAY! DO YOU WANT MY HEAD TO EXPLODE!?"

Feb 11, 2008

Haha. Yeah, it is pretty amusing that I've got where I've got without knowing some of the most basic shizzle. Back in grad training I was chucked off the credit structuring desk and put into equities as they thought I couldn't handle it. Best thing that ever happened to me lol, those dorks got flat YoY (1st -> 2nd yr) bonuses. Anyway, I asked a couple of people on my team at work today and they weren't so sure either - a VP didn't know where the shares "went" once bought back, instead of Treasury he said they were converted to cash! And there was disagreement about whether the mkt cap would get back to previous levels or not through share price increase.

Feb 11, 2008

you're a toolbag. chuck norris is gunnin for you.

Feb 11, 2008

you do not trade equities with that question...good call nystateofmind

Feb 14, 2008

This is not the first time these kind of things have happened, thats why I would take advice and salary stats etc. with a grain of salt because its probably a summer analyst, hehe.

Mar 5, 2008
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