Question

how do buybacks increase the price of a stock? - should politicians be telling companies when...

how do buybacks increase the price of a stock?

- should politicians be telling companies when they can or cannot buy back their own shares?

- if you were the CEO of a company about to embark on a buyback plan, how would you appease the politicians' concerns?

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Answer #1

A buyback reduces the number of shares in a company held by the public. Because every share of stock is a partial share of a company, the fraction of that company that each remaining shareholder owns increases. Therefore in the near term, the stock price may rise because shareholders know that a buyback will immediately boost earnings per share.

- The politicians should not be telling companies when they can or cannot buyback their own shares as this may result in non-legal trading.

- We can appease the politicians concerns by showing the company performance and convincing the reason of buyback to the politician.

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