tag:blogger.com,1999:blog-5465015914589377788.post4835184763132456226..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: BCE Share BuybackMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5465015914589377788.post-50576187744207950542008-12-15T22:44:00.000-05:002008-12-15T22:44:00.000-05:00Gene: I agree that dividends tend to suppress sto...Gene: I agree that dividends tend to suppress stock price increases and are therefore bad for option holders. However, buybacks may not always raise the stock price.<BR/><BR/>In theory, if the stock is fairly priced, the reduction in cash holdings of the company exactly offsets the reduced number of outstanding shares leaving the stock price unchanged. On the other hand, the increase in demand to buy the stock may give it a short-term rise, but this will fade quickly. Over the long term all that has changed is that investing in the stock has become a slightly smaller investment in cash, and a slightly larger investment in the business enterprise. If the business is healthy, then it should create larger returns than interest on cash. So, this should cause the stock to rise a little more than it would have if the buyback hadn't taken place, but the effect is small.<BR/><BR/>Overall, the most important consideration in how a stock buyback affects the stock price is whether the stock is under- or over-valued at the time of the buyback.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-23038064020679027232008-12-15T20:44:00.000-05:002008-12-15T20:44:00.000-05:00Fortunately, that same company adopted a decent si...Fortunately, that same company adopted a decent sized and growing dividend after the option grants. Option grants tend to encourage management to be tight fisted, since dividends dampen share price increases. Option driven managements prefer buybacks, which raise the price.genehttps://www.blogger.com/profile/05608927986297939720noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-81193115272130037692008-12-15T18:28:00.000-05:002008-12-15T18:28:00.000-05:00Gene: That's funny. There is only one reason why ...Gene: That's funny. There is only one reason why companies introduce option plans: to enrich employees at the expense of shareholders. The worst part of it is that because the payout is uncertain, companies issue a large number of options to each employee who gets them. Otherwise, it doesn't seem like much to the employees and they prefer bonus plans.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-42079839786093063632008-12-15T17:03:00.000-05:002008-12-15T17:03:00.000-05:00A company I owned shares in justified introducing ...A company I owned shares in justified introducing an option plan by stating that the increased share count would help the liquidity of the stock. I felt my stomach fall a little when I read such flimsy justification.genehttps://www.blogger.com/profile/05608927986297939720noreply@blogger.com