Essay - Buyback Strategy 1. Stock Buyback can be Beneficial for Both...

Buyback strategy

1. Stock buyback can be beneficial for both the company and shareholders if it is well thought through and ***** for all involved. Managers can for example increase their company's share price, benef*****ing existing investors and raising expectations regarding the performance of *****ir stock. Under certain circumstances this is therefore a good ***** to provide potential investors with a signal regarding the ***** options at ***** company. It can also benefit investors in terms ***** receiving returned cash efficiently. This is however only true if there is a genuine higher v*****lue in the stock than currently indicated by the market *****.

This is however not always the case, as there may be many reasons why a comp*****ny would wish to buy back *****. ***** could for example mislead ***** into *****lieving that the stock is worth more than is actually the case. Indeed, an increasing amount of comp*****ies have begun to include buyback ***** as a strategy in their business. Some even do so to inflate the prices of their ***** in order to buffer a we*****k market or to *****crease financial leverage. It is therefore important to critically assess the motivations for buyback strategies; some companies do not serve the interests of their inves*****rs as much ***** their own. Furthermore, when stock is bought back, it means a decrease of stock available to investors, which results in bull *****s. Other companies buy back stock to allow an *****crease of s*****ck options for their employees, with the result of fewer stock available for investors.

While ***** ***** strategies may therefore benefit *****, th***** is not ***** the case in all circumst*****ces, and investors need to be extremely critical when reviewing their stock options in the light of th*****. In some cases it is best to avoid investing, while in o*****ers a buy***** strategy can provide a good indic*****tion of increased value expectation.

2. Agency problems could relate to a company's internal and external image. Intern*****y, employees who receive benef*****s from *****back stock may be disadvantaged in terms of value. While stock may be used instead of monetary motivation, management ***** ***** the value ***** *****se and gain more ***** employees with less investment. Further*****, a buyback strategy may result in a negative external ***** ***** for the company when stock is later revealed to be of lower value than merited by the buyback price.

3. I believe that ***** buybacks are indeed a strategy. A ***** ***** be defined as a plan of action ***** fur*****r the business advantage ***** image of a *****. As seen above, ***** the strategy may be to the advantage or disadvantage ***** the investor, it is always ***** to the advantage of ***** company buying back stock. Some ***** include th***** ***** as part of their yearly ***** plan and projections for the future. The disclosure of buying back strategies can also be used as a tool to encour*****ge future investments. As such, it is an action ***** further the *****'s business