Originally Posted by
waflyboy
I wouldn't consider a stock repurchase "wasted" money.
Management has incentives to improve shareholder value (as mentioned above, they are usually shareholders, after all). Often times management will justify a stock repurchase by asserting their the best investment opportunity at the moment is the company itself. That is essentially what the company is doing: investing in itself.
A stock repurchase could improve the stock price by decreasing the supply of common stock on the market. In addition, the balance sheet is affected: assets are decreased (due to a decrease in cash) and equity is decreased (due to a decrease in outstanding shares). Generally speaking, this means a balance sheet analysis will show improvements for Return on Cash and Return on Equity. This may be viewed as an indication of improving financial strength in the eyes of investors, creditors,and analysts.
The stock repurchase is one of the "flavor of the week" tools that management in all types of industries is using to make the earnings look better. This has been going on for a while this year.
You could align yourself with the interests of management if you became a shareholder as well. If enough of the employees of the company became shareholders, things might change a bit. However, United seems to be an example of that not working out too well in the long run. Plus, it would be hard to reproduce the magnitude of management's earnings, since we dont have the option grants that they have.