Tag Archives: a share buyback proposal.
A buyback allows companies to invest in themselves. Reducing the number of shares outstanding on the market increases the proportion of shares owned by investors. A company may feel its shares are undervalued and do a buyback to provide investors with a return. And because the company is bullish on its current operations, a buyback also boosts the proportion of earnings that a share is allocated. This will raise the stock price if the same price-to-earnings (P/E) ratio is maintained.
Another reason for a buyback is for compensation purposes. Companies often award their employees and management with stock rewards and stock options; to make due on rewards and options, companies buy back shares and issue them to employees and management. This helps avoid the dilution of existing shareholder.
Put your trading skills to the test with our FREE Stock Simulator. It’s the ideal platform to get your feet wet in the markets! Submit trades in a virtual environment with $100,000 in cash before you start risking your own money. Sign up today and start interacting with other traders from diverse backgrounds and experiences, and learn the methods behind their trades to become a smarter investor.
