 estimate of discounted free cash flow (plus non-productive assets like cash). The stock price is that value divided by shares outstanding. A stock repurchase affects both the numerator and denominator so its impact on price is ambiguous.
A buyback at a fair price has no impact. Imagine a company with one asset: $100. There are 10 shares outstanding so each share is worth $10. Assume two shareholders each hold five shares. The company decides to buy back two shares at $10/share. Assume each shareholder sells one share. After the repurchase, the company has $80 of cash and eight shares outstanding. The stock price hasn’t changed — it’s still $10. Each shareholder has four shares and $10 of cash, so there is no change in shareholder wealth either. All that has changed is the form of the wealth: it is now a mix of shares and cash. The repurchase acts like a dividend: it distributes cash to the shareholders.
My research finds that the average repurchase announcement increases the stock price by about 2.5 per cent (over and above the market). The source of this gain is signalling and not manipulation. Shareholders infer that repurchasing companies will have higher free cash flow in future — which may actually be what companies are signalling.
First, that insiders use buybacks to cash out. That may happen occasionally, but my research shows the average insider is honest: she earns no abnormal returns on her trades. If some insiders do take advantage, then that is either a regulatory matter for the relevant securities overseer or a contractual matter for shareholders and the insiders to sort out. For example, many companies institute black-out periods during which insiders are prohibited from trading.
Second, that repurchases are a tax dodge. The tax on a repurchase is the tax on the capital gain associated with selling the shares. If shareholders sell when the company buys back, then they pay tax in the same year. But shareholders have the option to wait. If they do wait, then they don’t get any cash and shouldn’t have a tax liability.
A third error is the worry that “… companies (are) leveraging up and funding buybacks with debt.” Debt is not the devil’s brew. Corporate finance includes Nobel-prize winning theories about the optimal capital structure — and it isn’t zero debt. When a company has too little debt, a debt-financed stock repurchase is the textbook example of how to increase leverage.
A fourth recurring criticism worth mentioning is that companies should use profits to raise wages and invest in new projects — not buy back shares. The article paraphrases William Lazonick, who believes Apple has innovated less since it began buying back stock. This claim reflects the hubris of the central planner. What does Lazonick know of Apple’s reinvestment opportunities? In any event, the causality most likely runs the other way. The dearth of projects is most likely attributable to Steve Job’s demise and to the maturing of the computer/phone market. Value-maximizing companies don’t repurchase if they have attractive projects to invest in. But if companies lack for good projects, the best thing they can do with excess cash is distribute it to owners rather than squander it on money-losing projects. Shareholders can then reinvest the cash in companies with more profitable projects, thus increasing employment and wealth across the economy. Who better to make that reinvestment decision than the shareholders? They have skin in the game.
But the article really isn’t about stock repurchases. Its message mirrors one by U.S. senators Chuck Schumer and Bernie Sanders. In a New York Times op-ed earlier this year, they argued for a law requiring companies to obtain permission before returning profits to shareholders. Permission would be conditional on the company’s social justice actions (e.g., its sustainability, diversity, inclusivity and equity). But such a law would violate the U.S. Bill of Rights, which entitles owners to the enjoyment of their property. Like the senators, the Post seems to be arguing that workers should control the means of production — not owners. The history of that sort of economic system does not recommend it.
William J. McNally is a professor of finance at Wilfrid Laurier University.Samsung UT-B (commercial display) overview and full product specs on CNET. Samsung 46″ SyncMaster UT-B LH46MVPLBB/ZA x VESA LCD Flat Panel Video Wall Unit Commercial Display. The Samsung SyncMaster. The Samsung UT-B Monitor / TV Professional LCD Display – LH46CBPLBB/ ZA is 46 inches and is a Dual Mode TFT-LCD with Optional Video Wall Solution.
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Projectors by Lori Grunin Dec 21, Who’s playing, start times, how to watch and more College Football Playoff Be respectful, keep it civil and stay on topic. The display port lets you take advantage of today’s high-bandwidth content, enabling you to create a professional and powerfully compelling digital signage solution Energy-Efficient Samsung is committed to creating more efficient, more environmentally conscious technologies.
TVs by Geoffrey Morrison 2 days ago. Technical Information Find out Technical Information. TVs by David Katzmaier Dec 20, With the UT Series you can display professional digital content without needing to purchase extra external equipment.
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The UT-B Series features a bezel measuring just 2. Discussion threads can be closed at any time at our discretion. It features Samsung’s thinnest bezel, which makes for nearly seamless viewing with more of your content on the screen.
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Samsung UT-B commercial display Sign in to comment Be respectful, keep it civil and stay on topic. Environmental Parameters Min Operating Temperature. Second remote control type.
Agoriad Cyf uses online learning as a key ingredient to help local disadvantaged people succeed in work.
Established in 1992, Agoriad Cyf develops employment opportunities for disabled and disadvantaged people in North and Mid-Wales. The organisation works with local businesses to identify recruitment needs and helps their clients fulfill these roles through training and support. Between 2013 and 2016 over 2000 people found employment through their involvement with Agoriad.
Agoriad uses a “right person right job” approach to match the opportunities with their clients, although in many cases gaps may exist in that person’s CV. These gaps are typically a lack of experience or industry-specific knowledge but can also include mandatory training such as food hygiene certificates or construction industry card schemes. These gaps can sometimes become apparent after a client has started employment but is still supported by Agoriad through that all important first few months.
Agoriad have found many benefits of including online learning within their employment support to clients: learning can be tailored on a one-to-one basis without the risk of incurring unnecessary classroom and tutor costs. In addition learners respond enthusiastically to the recognition that the end of course certificate brings. This then translates into two major benefits - increasing motivation to stay on the employability scheme and building personal confidence.
Like many organisations, Agoriad found providing training and support through conventional face-to-face learning poses many issues: scheduling candidates around their needs; finding subject tutors; accessibility for the less mobile; filling a classroom with a minimum class size for a set topic; and missed appointments. These issues undermine the relationship with the client, consume valuable advisor time and, inevitably, incur avoidable costs for tutors and resources.
In response to these issues Agoriad have used online learning, provided by The Digital College, to deliver individually tailored skills support based around the client’s needs. This support through e-learning is now available 24x7 on a variety of mobile devices making it easy for the client to access and use. Courses are self-