Info on Stock Buybacks: Why would a company ann
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Posted On: 04/22/2020 10:49:18 AM
Info on Stock Buybacks:
Why would a company announce a stock buyback program before the actual stock purchase?
In the interest of fairness, public companies are required to disclose any material transaction that might impact a potential or existing shareholders decision to buy or sell their shares. Buybacks are done with a company's cash balance and may deplete it to a small or large extent. The shares that are purchased must be cancelled and retired to treasury- this impacts the number of shares outstanding and all of the financial ratios that investors rely on in determining the value of an investment. By disclosing a proposed buyback before the fact, a company is sending a signal to its shareholders as to what price it deems to be attractive for a repurchase. This is considered to suit the interest of full disclosure and transparency. It also allows investors to make a better decision about their current or future holdings in a particular stock.
Buybacks are traditionally approved by a company's board of directors if there is a feeling that there is a greater return on investment in purchasing the company's shares than there is in investing that cash into the business. Buying shares in the market without following the disclosure protocols can subject a company to liability from shareholders who believe they were treated unfairly. For example if someone sold a large position in a company while the company was secretly buying in the market, there could be an accusation that the investor might not have sold because they could have received a higher price in the future because the buyback would reduce the shares outstanding and result in an increased earnings per share.
Public companies have an obligation to be fair and transparent so that investors are not manipulated or disadvantaged by their actions.
https://www.quora.com/Why-would-a-company-ann...the-market
Why would a company announce a stock buyback program before the actual stock purchase?
In the interest of fairness, public companies are required to disclose any material transaction that might impact a potential or existing shareholders decision to buy or sell their shares. Buybacks are done with a company's cash balance and may deplete it to a small or large extent. The shares that are purchased must be cancelled and retired to treasury- this impacts the number of shares outstanding and all of the financial ratios that investors rely on in determining the value of an investment. By disclosing a proposed buyback before the fact, a company is sending a signal to its shareholders as to what price it deems to be attractive for a repurchase. This is considered to suit the interest of full disclosure and transparency. It also allows investors to make a better decision about their current or future holdings in a particular stock.
Buybacks are traditionally approved by a company's board of directors if there is a feeling that there is a greater return on investment in purchasing the company's shares than there is in investing that cash into the business. Buying shares in the market without following the disclosure protocols can subject a company to liability from shareholders who believe they were treated unfairly. For example if someone sold a large position in a company while the company was secretly buying in the market, there could be an accusation that the investor might not have sold because they could have received a higher price in the future because the buyback would reduce the shares outstanding and result in an increased earnings per share.
Public companies have an obligation to be fair and transparent so that investors are not manipulated or disadvantaged by their actions.
https://www.quora.com/Why-would-a-company-ann...the-market
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