What Do you Think About Stocks Buyback by Companies
Except for Amazon and a few other companies, so many publicly traded company do buy back their stocks from the market with their excess cash to enable the price of their stocks to go high. It is like a company buying back its own printed currency with a real currency owned by them. This often cause an increase in the price of the stocks and this often make traders happy.
When a company has excess cash, they are likely to do four things which are;
Invest in the business
When companies invest in their business, they do it in form of expanding the company reach to other regions, investing in employees, improving wages, innovation, and many more. With this, the company invest in itself and it can also use the funds to pay debts.
Distribute dividends to investors
This often happens monthly or quarterly when companies pay dividends to investors who invest in their companies so they will keep their investment thereby allowing passive income.
Invest in other companies
When the company uses its excess money to invest in another business which is public with the aim of making profits in the future from the investments.
Buyback their shares.
Internally buying the stocks of the company so as to increase the value of the stocks. In most cases, it is believed that when company buys back their stock, traders and company executives who are paid in shares gain from buybacks.
Buybacks have been a major thing especially in the aviation industry and the tech industry and it had an effect during the pandemic as most of the airline didn’t have free cash to keep their businesses going as the company already used its liquid funds to buyback to stocks. With Buybacks, the company buy stocks from investors and remove them from the market and with this, the earnings per shares go up. A lot companies that have filed for bankruptcy at one point bought back their stocks which could have been used to improve the business and this is why a lot of people are against stocks buyback.
It will be important to know what your thoughts are about stocks buyback.
If a company buyback stocks it means that they have no idea how to invest the money usefull.
A management without ideas is (in my opinion) not the best choice for a company.
I don't really know much about that but it seems to me that it can be beneficial for certain companies. The ideal is to look for the best for our business and try to reinvest the capital itself. I think.
Yes if company buyback shares it means that they have no idea how to invest the money usefull.
@tipu curate
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I really don't see anything bad in stock buyback provided it's gonna be a win-win for both the company and the stock buyers. There's actually no doubt that the company benefit more from this process though.
Thanks for sharing this great post with love from @hardaeborla and I hope you have a great day ahead
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It's not bad, but it meens that a company has no idea how to invest the money usefull.
In addition as it was pointed out in the post many companies who bought back shares come later to the situation that this money they used to buyback the shares misses if the company got in trouble.
Hi @hardaeborla thank you for sharing your opinion with me.
Hello friend, good publication, good approach.
To be honest I do not have knowledge about these movements that companies make, the truth in all this is that companies will do what is necessary to stay afloat and renew themselves.
It should be in that way, but maybe the manager look to his bonus for the year and not to the (longterm) future of the company ?
Your first paragraph says it all!! It's all about raising the price of the stock, even thought that only works short term.
They play with speculation and then criticize the crypto markets :D
Nice and detailed post about buy backs from companies, I really did not have a complete knowledge as to how this happens until I read this.