Buyback is not necessarily good for investors
When it comes to buyback, many people may think of stock prices raising and investors confidence increasing... But is this true?![]()
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Buyback essentially means that the listed company spends money to buy its own stock, which produces two results: one is "blocking" for writing off; the other is "hiding" for later use.
There are many reasons for giant companies to buyback stocks:
1. Major shareholders feel that the company's prospects are very good, but the stock price is too low. Instead of selling it cheaply, it's better to buy it yourself.![]()
This sends a signal to the market that the company's stock price is severely undervalued, thereby increasing investor confidence and stabilizing the price.![]()
1. Major shareholders feel that the company's prospects are very good, but the stock price is too low. Instead of selling it cheaply, it's better to buy it yourself.
This sends a signal to the market that the company's stock price is severely undervalued, thereby increasing investor confidence and stabilizing the price.
2. When the company has an amount of freely flowing funds and feels that the stock price is indeed low, it will also repurchase the stock.
This can reduce the circulation of stocks in the market, increase earnings per share, and help the prices to the moon.
3. At the same time, the stock option plan for employees can also be perfectly solved by repurchasing. After all, the direct issuance of new shares will dilute the original shareholder rights.
According to normal logic, the stock price will rise after buyback. But is this true?
The world of capital is very complicated.
First of all, it depends on the strength of the repurchase. The price depends on the game between buyers and sellers. The more you buy in, the easier for rising. On the contrary, with a daily turnover of more than one billion, but millions of buyback for a stock, which has no effect on the trend of the stock price.![]()
Sometimes, the purpose of buyback is not simple. Major shareholders want to reduce their holdings, but the stock price has fallen sharply. At that time, it’s not worthwhile to reduce their holdings. Therefore, it throws out a buyback plan to stabilize the stock price.![]()
In fact, there are many reasons that affect the company's stock price. Even if the price is undervalued, it’s difficult to repair it by repurchase. For the market, buyback conveys good news and gives investors confidence. But it can only be used as a bonus item rather than trading standards.
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Wilson_wu : Thank you very much! Very specific sharing,Remember one sentence, everything has two sides
NANA123OP Wilson_wu: