- shares outstanding — reduced, since the repurchased shares (say 100M out of 500M total outstanding) is no longer available for trading.
- Who pays cash to who? Company pays existing public shareholders (buying on the open market), so company need to pay out hard cash! Will reduce company’s cash position.
- EPS — benefits, leading to immediate price appreciation
- Total assets — reduces, improving ROA/ROE
- Demonstrates comfortable cash position
- Initiated by — Management when they think it is undervalued
- Perhaps requested by — Existing share holder hoping to make a profit
- company has excess capital and
- A.k.a “share repurchase”