Originally Posted by
Snoopy
No. (see my previous post).
The profits from the underlying business are spread among less shares. So if 10% of the shares are bought back, that means each shares that remains should be worth:
100/90 = 11.1% more
This question is not so straightforward to answer. One might argue that whatever price a company pays for its own shares will reduce the number of shares on issue and so increase earnings per share. So the price the company pays does not matter. However it is clear that the lower the share price, the more of its own shares a company is able to buy with the same money. So I would argue that the price the company pays for its shares does matter. This means a company can pay too much for its own shares, in my view.
How much is too much? Not an easy question to answer. But if a company buys back its own shares then somewhere down the track decides to issue new shares at a lower price than their buyback price, that is a sure sign the buyback price was too high.
SNOOPY
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