Re:Intel Brags of $152B in Stock Buybacks. Why Does It Need ...
by positr0n on Thursday March 28, 2024 @07:27PM
(#39858697)
But companies are not pots of assets. What you are buying is assets - liabilities + predicted future cashflow * discount rate.
So a more realistic example would be a company with 100 shares, $1000 of cash, and $1000/yr stable income.
So before a buyback, 1 share grants you the benefits if whatever the company does with $10/yr of income. Whether it be dividends, reinvestment, etc.
If the share price is $25 and they spend half their cash on hand to buy 20 shares back, now one share gets you $12.50/year of income. Thus the share is worth more than it was before.
Disclaimer: Armchair finance / economics knowledge. Hope the above is correct.
So a more realistic example would be a company with 100 shares, $1000 of cash, and $1000/yr stable income.
So before a buyback, 1 share grants you the benefits if whatever the company does with $10/yr of income. Whether it be dividends, reinvestment, etc.
If the share price is $25 and they spend half their cash on hand to buy 20 shares back, now one share gets you $12.50/year of income. Thus the share is worth more than it was before.
Disclaimer: Armchair finance / economics knowledge. Hope the above is correct.