How do stock buybacks affect capital structure?

Alrighty,

You have 10M in Eq. Value, 10M in Debt, 5M in Cash, with a total EV being 15M. If you conduct 5M worth of buybacks, I understand Eq. Value is now 5M, 10M Debt remains, and Cash is now 0M, giving you the same EV of 15M.

However,

Isn't capital structure changed in the sense that we had an Equity/Total Capital percentage of 50% and now it is 33%? (10M/10M + 10M for the first one and 5M/10M + 5M after buybacks)?

Trying to wrap my head around this concept

 

So immediately there would be no change to the capital structure in terms of EV but its actual component percentages would change, but theoretically, the component percentages will become the same after the stock price increases but EV will end up changing? (Apologies if that was worded God awfully)

 

Sed consequatur voluptatibus eos amet quibusdam dolorum et. Voluptatum suscipit expedita et aut. Libero aliquam et dolorem quos aut numquam. Hic et autem repellat.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”