Comment by jstanley
8 hours ago
> Buybacks create a tendency toward higher share prices, but only while they continue.
Buybacks increase the share price because you have a company that is worth (for sake of argument) the same as it was worth before, except now there are fewer shares available.
A fixed market cap divided by fewer shares equals a higher share price.
In the limit case imagine buying back all but 1 share. Now that 1 share represents the entire value of the company, so the share price would equal the market cap.
The company is worth a bit less after the buyback, because it's given away some of its money, which was part of its valuation. But the effect should still be positive on the share price.
Good point.