Correct.You are now repeating what I've posted but it doesn't change your misleading comment that you get more shares. |
 Let's try the five people owning a business and one wishes to leave - in more detail.
There are two routes to this. The leaver wants 20% of the value of the company. Let's say that's £20 as the company is valued at £100.
The four remaining owners can each pay into the company £5 which is then paid out to the leaver. The value of the company remains at £100 and each remaining owner owns £25 in value - the original £20 plus the £5 they chipped in.
The other route, as you followed, causes the 'company' to pay out the leaver. You used 'earnings' in your example. I'd prefer to use the word assets. It may well have been earned profit. The leaver gets £20 out of the company. The company is now worth £80. As it's owned by the four remainers they stil own £20 worth each. They personally have not placed any more money into the company and they have not gained any increase in share ownership/value.
This second route is the one adopted by BB's. We, the current shareholders, are not asked to contribute more money towards the BB. It is the company's assets that are being used to fund that BB. So, there are indeed less shares in circulation afterwards and, equally, a lesser amount of cash held as assets.
And, Value, just as a reminder of your post #8064:
"Would you be in favour of the company buying shares at these prices from the market and then putting them in your account so your holding increases as other holders sell? The next year you receive more dividends and more shares?"
You did indeed suggest you'd get more shares - albeit delayed by a year.
Now, doctor, where's that dark room? |
If you had 3 percent of the shares and they bought back and cancelled 1 percent of shares outstanding you would now own 3.03 percent of the company. Your ownership of the company would have increased. |
Ps read post 8090Have a good day |
So the very basic example of how it is exactly the same is wrong? Please explain. |
"It?s exactly the same as giving you more shares.?"No it's not. |
I never said you gain actual shares with a buyback. I said it is exactly the same from a mathematical perspective. Please look at the example I gave. This is primary school stuff. |
ValueYou posted you get more shares, you simply dont, |
mcunliffe
i would certainly agree with you about when the company buys back shares regarding getting value.standard life often were buying when the price was high which gave little concern for the investors,bad management in my opinion.. |
ValueI will add that if you held 3% of the shares in issue and the buyback reduced the shares in issue by say 1%, then yes your holding would increase In percentage terms but you still haven't gained any actual shares which is what you are saying, which is complete rubbish. |
I am perfectly aware of how a buyback works. I am trying in the most simple terms I can to explain to you how your share in the business increases with buybacks. |
Complete nonsense.I see it's a waste of time trying to discuss because it's clear you don't actually understand the mechanics of a share buyback - the share issue is reduced, the number of shares available to purchase / sell has reduced, nobody is given the shares, nobody can buy the shares that the company has bought, they are cancelled. |
If you cant understand that there is nothing more I can do for you. |
If 5 people own a share of a business and 1 of them wants to leave they decide to use some earnings to buy out that person. The company buys the share and cancels it. The remaining holders have increased their share in the business to a quarter each. If 5 people owned 100 shares each and we did the same but instead of cancelling the shares from the leaving partner 25 shares were distributed to the remaing 4 after being purchased it would have the same effect. The remaing partners would now own a quarter of the company each. |
?You own more of the company when they buyback shares. It's exactly the same as giving you more shares.?How are buybacks giving shareholders more shares?, that's what you posted which is completely wrong and misleading. |
Dillards 100x your money since 2009. Sales are exactly the same. Just buybacks and cost control. |
Value"You own more of the company when they buyback shares. Itâs exactly the same as giving you more shares."Completely disagree, shareholders do not own more of the company - the company doesnt buy shares and distribute them to existing holders.Buybacks reduce the shares in issue thus the earnings per share increases and thus in theory the share price on the market should increase by the same amount (some also believe the rating / PE ratio will also increase due to the BB). The US institutional investors favour buybacks so it has become a bit of a fad and what the yanks do we tend to follow. It's a marmite strategy as the underlying business is not actually growing earnings plus they at times continue buying without determining the equivalent rate of return. Put simply how much funds would be required to be invested in the business to increase profit/earnings versus the amount of shares bought and the subsequent increase in profit / earnings / eps. |
Have you looked at Dillards, carmax, autozone, next etc? That is all you need to see. The management of the company understand this so eventually we will have the buybacks reinstated. |
Value: Thanks for the dark room suggestion and that I should 'work this one out'.
I was rather hoping you would present a decent argument in support of Buy Backs in much the same way I am trying to present an argument for a better use of cash by a company.
This is a long running debate that has been discussed on many threads on these boards. We once had a vote on BB's - those in favour and those not. The not's won it by a factor of two to one as I recall.
I am genuinely looking for good aspects of BB's - I haven't found one provided by you.
The best I have come across over the past months is one that mentioned Warren Buffet; Warren believes that BB's should be treated like the purchase of shares by investors, only buy when the price is low. |
I think you need to sit in a dark room and work this one out. I don't have time to explain basics like this. Company buys its own shares in the market. If it chose to distribute them to remaining shareholders or shred them it has exactly the same effect. |
Value - I'm really keen on clear wording;
In #8064 you said:
Would you be in favour of the company buying shares at these prices from the market and then putting them in your account so your holding increases as other holders sell? The next year you receive more dividends and more shares?
Then in #8074 you said:
You own more of the company when they buyback shares. It’s exactly the same as giving you more shares.
Really?
This is NOT how buy backs work in practice. Rights issues give you more shares - if you choose to buy in. Buy Backs purport to benefit holders but it is arguable.
I can agree with your that any dividend being distributed after a buy back will provide a greater amount PER SHARE for the remaining (lesser number of) shares but only if the management of the company elect to distribute either the SAME monetary value as before the BB or, of course, a higher value. Generally, companies tend to keep the pennies-per-share payment the same year on year and hence, as a long-term holder I would not reap any additional benefit. I am aware some companies raise their actual dividend pence-per-share payment year on year.
I would rather a management (those who 'understand') use their spare cash to grow the bloody company I am invested in rather than but their own shares back. It i growth that wins in the end. If you bought every one of your own shares back you'd be a unlisted, private entity.
If you spent the money instead in innovative expansion, acquisition, new product development then you'd have a behemoth of a company.
But is needs management with vision. Sadly lacking in ALL areas these day Value. |
I think you just picked the wrong stock to be honest. You need decent management. With cigarettes you have to be particularly stupid to mess it up. Imperial is doing well and gobbling up their shares currently. You can see which way the EPS is going when comparing with sales and that's up. Dividend up, shares price up. And they will keep buying back shares indefinitely. Nice |
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