Corporate Stock Buybacks – Do They Affect Markets?
Fisher Investments recently wrote an interesting article asking whether corporate stock buybacks affect markets. Here is their conclusion:
“Yes and no? Stocks move on supply and demand. Stock buybacks, where a company buys and takes shares off the market, theoretically reduce supply. They can also raise earnings per share, thus rewarding shareholders. So, all else equal and on paper, stock buybacks are bullish. But reality, as always, is more complicated.
Buybacks are just one factor affecting supply. There are others, and demand matters, too. They may not reduce supply if they merely offset secondary issuances, like employee stock awards. Often, buybacks merely ‘sterilize’ new issuance. Other negative (or less bullish)…
