SHARE REPURCHASE:

SHARE REPURCHASE:
TO BUY OR NOT TO BUY
INTRRODUCTION
àThere are growing surge of buyback
à There are four key finding:
1. 39% in order to improve their earnigs per share numbers.
2. 28% as away to distribute excess cash to share holders.
3. 21% as trying to reduce the cost of employees’ stock eption plans.
4. 12% noted that adjusting capital structure was the main reson for their stock buyback
--. The mission; to determine the long-term effect of stock buyback programs on a company’s stock price and to access which company benefit most from these programà. Published in the study: the share repurchases decisioi : causes consequences and implementation gidelines

WHY REPURCHSE SHARE
à Commonly there are 5 reasons:
To increase share repurchase
To reationally the company’s capital structure.
To subtitute share repurchases for cash dividend payout
To prevent dilution of earnings.to deploy excess cash flow.
à To repurchase there several optionsà open markets repurchaese, privately negotiated repurchases, private negotiation à research use open market
à Data: 48% use company with caps $200 million, 10% that Use Company inexess $10 billionà that use 37 different industries
FOUR KEY FINDING
Shares outstanding
no substitute for dividend payout
Effect on earning per share
Effect on debt
GUIDELINES FOR GETTIGN GOING
à Recommended for company for repurchases equity, when:
when they have excess debt capacity, and the supply of funds exceed the demand
when they are under performing,in terms of profitable and sales, relative to their industry average
à When avoid buyback:
When they’re over-leveraged and sales growth exceed industry average
when both their profitability and sales growth rates exceed industry averages
THE VALUE CONNECTION
à One key to understand the complexeffect6 of share repurchases program on a company’s profitability is the Shareholder Volder Based Management Framework (SVBM frameqork
)