Share Buyback

Baldytyke88

Do share buybacks increase a company's value, it doesn't sound logical to me.

If they have cash reserves, then those reserves will be lower, or it could put them more in debt. Money doesn't grow on trees?

Vistry Group PLC has executed a share buyback transaction, purchasing 49,100 of its Ordinary 50p Shares as part of its ongoing Share Buyback Programme. The shares were acquired at prices ranging from 602.00 GBp to 623.00 GBp and will be cancelled, reducing the total number of shares in issue and potentially enhancing shareholder value by increasing the earnings per share. This move aligns with the company’s strategy to optimize its capital structure and deliver returns to its shareholders.

eskbanker

As it says, reducing the number of shares in issue increases earnings per share, which is one of the key metrics when valuing companies, but nobody is claiming that it literally increases the absolute financial valuation as such!

MX5huggy

No the total value of the company does not increase. 

If the company has in total 100 shares worth £10 each so the company is worth £1000. Part of the value of those shares is £100 the company has in the bank. They (the company) decide to buy 10 shares and cancel them. There are now 90 shares worth £10 each, the company is worth £900 and does not have the £100 in the bank. 

The market might decide this is a good thing and the value of the shares could rise. 

Baldytyke88

eskbanker said:

As it says, reducing the number of shares in issue increases earnings per share, which is one of the key metrics when valuing companies, but nobody is claiming that it literally increases the absolute financial valuation as such!

Their share price increased at roughly the same time as the buyback, but they are way below the price compared to six months ago.

wmb194

Baldytyke88 said:

Do share buybacks increase a company's value, it doesn't sound logical to me.

If they have cash reserves, then those reserves will be lower, or it could put them more in debt. Money doesn't grow on trees?

Vistry Group PLC has executed a share buyback transaction, purchasing 49,100 of its Ordinary 50p Shares as part of its ongoing Share Buyback Programme. The shares were acquired at prices ranging from 602.00 GBp to 623.00 GBp and will be cancelled, reducing the total number of shares in issue and potentially enhancing shareholder value by increasing the earnings per share. This move aligns with the company’s strategy to optimize its capital structure and deliver returns to its shareholders.

In theory it can be accretive to NAV if you think you’re buying back shares below NAV.

eskbanker

Baldytyke88 said:

eskbanker said:

As it says, reducing the number of shares in issue increases earnings per share, which is one of the key metrics when valuing companies, but nobody is claiming that it literally increases the absolute financial valuation as such!

Their share price increased at roughly the same time as the buyback, but they are way below the price compared to six months ago.

....which is probably why they chose an opportune moment to buy some back!