Stock Buybacks Debate

This is sort of silly - they're trading the new shares for lots of money, which now belongs to everyone who owns the shares. So they own a smaller share of the total company, but that company now includes itself plus $500M in new money that wasn't there before. If the company is properly priced at the moment, it's a net neutral transaction. If it's overpriced, it's great for the current shareholders.

It's a way of "giving money back to shareholders" because buying their own shares on the open market means that they inflate the stock price on the market by buying the existing sell orders out there.

It's not "stealing" from the market. All it does is increase the value of each share in proportion.

This is just nonsense. Anyone can sell the stock if they wish, there is no privilege for the high-net worth. Additionally, shareholders benefit from reduced share count because it increases their claim on future profits thereby increasing compounding.

It's no such thing. As a shareholder I am happy for companies to buy back shares and thereby increase the value of the remaining shares.

The claim has nothing to do with making the shares available to the public for purchase, by the shareholders or otherwise. Issuing stock is dilutes existing stockholders. An example with much simpler numbers to make things obvious.I have company X, which you think is worth $15. Company X has 10 shares of stock. I happily sell you one for $1. You are excited because you have decided it is worth $1.50 ($15/10). I am happy because I have a dollar. Tomorrow, I issue myself 10 new shares of

> No. Your shares were _diluted_ by the company issuing new shares. Now your 100 shares are worth half as much.That's not correct. A company sells shares in exchange for cash. That cash is owned by the company, which is represented by the shares.Companies can't simply dilute away their shareholders like you're suggesting. The money raised by selling shares doesn't simply disappear.

I thought that buybacks reduced the amount of shares in total, increasing the value of the remaining shares?

I haven't read the details but not entirely. They will likely dilute their own outstanding shares by adding the required shares needed to acquire the company at that value. This will lower the total ownership as a percentage that each share represents but now every share owns more stuff.So yes they are creating new shares making every other share worth less but it isn't a direct transfer of existing shares. You'll notice companies get board approval for setting aside a number o

No it doesn't. There are fewer shares in the company, but the company is worse less. There's no good reason to think that in general the remaining shares in a company will be worth more or less after buyback than what they would be worth if the company had simply held onto the money.