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Moneycontrol.com >> Message Board >> View Messages >> Emerging Markets
   You are here :     Moneycontrol     MMB    Market View      Emerging Markets                         Most active discussions of 2006 , 2007 & 2008
Buy Back options for companies (1)   06-Jul-08 23:16Tracked by (0)  
Posted by:   venkataramani on ( 06-Jul-08 23:16 )
Buy Back to beat stock undervaluation- Good Management decision to have good set of investors attached to the company without parting ways at any time by extending the helping hand to improve share value of company share.

Companies usually buy back their shares when they think they are undervalued, they have idle cash or want to give out stock options without diluting equity. In the case of DLF, the near 70% drop from its peak is the trigger for the company deciding to buy back shares.

By purchasing and extinguishing its shares, the company would boost earning per share. However, it’s important to note that a buyback announcement does not necessarily mean the company in question would actually buyback shares to the extent announced. Depending on the market price and its valuation call, the company could even do a part buyback. In that sense, buybacks may merely be a signal to investors and not a material support to stock price.

For corporates, particularly those who have surplus cash, low share prices are an opportunity for changing the capital structure of the company and enhancing shareholder return. It also helps them to get rid of unproductive cash, and reduces the risk of cash-rich companies making wasteful investments or an imprudent acquisition.

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