Originally Posted by
BenderRodriguez
$5B in stock buybacks is 13% of the current market cap. All things are not equal in that because a stock buy back is mostly psychological, but in terms of pure static dollars it should increase the value of the underlying by 13%.
Stock options anyone?
OK, So the company has $5 billion cash. Buys 13% of shares outstanding. The company has $5 billion LESS ASSETS. It isn't worth 13% more. The "shares" only have value if someone wants to buy them. The cash is King. Cash trumps psychological. The corporation can't spend psychological in a downturn nor fund my pension...as they proved in BK. Paying back 5B in debt adds value: stock price should go up. Buying 5B worth of jets for cash adds value: share price should go up. Nope, I'm solidly of the school of thought you reward SHAREHOLDERS with dividends and share price increase by increasing corporate assets/profits. You don't reward SHAREQUITTERS. Almost all the big air carriers went on a share buyback binge last time profits were high and gas was cheap. How soon we forget. OFG