Why Do Companies Buy Back Shares? (VIDEO)

Jacob Harper |


On April 22 Apple shook the investing world by announcing some major changes to how their stock would be floated on the public market. For starters, they decided to engage in a 7 to 1 stock split, lowering the cost of an individual share by one-seventh while adding an addtional seven shares for every one currently on the market. This move will have momentous effects on the how the stock is traded, increasing volatility but also increasing attraction from retail (i.e. not institutional) investors.

The other big change was that Apple decided to buy back $30 billion worth of shares, taking them off of the market. But what excatly does this mean? In this video, Education Unlocked explains why companies engage in share buybacks, how they change the value of a stock like Apple's, and the advantages and disadvantages of engaing in a large repurchase program.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 136.66 0.13 0.10 21,776,585
ASFBY ASIA FIBER CO LTD SPN ADR n/a n/a n/a 0

Comments

Emerging Growth

Naked Brand Group Inc

Naked Brand Group Inc through its wholly-owned subsidiary is engaged in manufacturing and selling of direct and wholesale men's undergarments to consumers and retailers.

Private Markets

Santo Diablo Mezcal

Santo Diablo Mezcal has been created to capitalize on a boom sector of the beverage market currently full of many small unmemorable products by producing one sexy, household, easily recognizable…

Mesa-Marshall 2 Well Project

MESA Resources ("MESA") is sponsoring the development of the two well direct drilling project -- "Mesa-Marshall #1-2". MESA, founded in 1992, is engaged in the acquisition, exploration and development of…