How a stock buyback works | Marketplace Whiteboard

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  • เผยแพร่เมื่อ 21 ส.ค. 2024
  • Companies often buy their shares back from the market. Here's Paddy Hirsch with why and how they do it. #MarketplaceAPM #Whiteboard #StockBuybacks
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ความคิดเห็น • 87

  • @mayacho4910
    @mayacho4910 ปีที่แล้ว +186

    Inflation depreciates idle money. I'm in a privileged position to be able to save almost 65% of our net household income, as I placed it on safer investments. The key for us was not spending beyond our means. If you invest and have other sources of income outside of dividends then you will be able to live off dividends. Got north of $520K in my portfolio as I bought a lot of dividend stocks before, I'm buying more now, and I will buy more when it drops further.

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      @theresagarcia1218 ปีที่แล้ว +2

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      @raymondbarnes5264 ปีที่แล้ว

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      @mariahhayes5089 ปีที่แล้ว

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      @danielkey1463 ปีที่แล้ว

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    • @contenteater
      @contenteater ปีที่แล้ว

      @@theresagarcia1218People need to lose for there to gain.
      Eat the Sheep 🐑

  • @sebastianr.7089
    @sebastianr.7089 4 ปีที่แล้ว +8

    We need more videos like this, Paddy Hirsch freaking rocks!

  • @smile_bro6762
    @smile_bro6762 6 ปีที่แล้ว +8

    Buybacks seem to be becoming a trend.
    Thanks for the breakdown.

  • @cdragon88
    @cdragon88 3 ปีที่แล้ว +3

    My man explained this in less than two minutes while others take over ten. Noice.

    • @mikafizz1022
      @mikafizz1022 ปีที่แล้ว +1

      True! Thanks for the positivity dude!

  • @Phosphoenol_pyruvate_CK
    @Phosphoenol_pyruvate_CK 6 หลายเดือนก่อน +1

    Quick and Concise

  • @teksight9714
    @teksight9714 6 ปีที่แล้ว +14

    You forgot to mention buy-backs are also done to game the P/E ratio.

    • @pelumiobasa3104
      @pelumiobasa3104 6 ปีที่แล้ว

      Tek Sight how would a company do that

    • @matthewhou3011
      @matthewhou3011 4 ปีที่แล้ว +5

      pelumi obasa by buying back shares, the company’s amount of issued shares decreases while the earnings stay unaffected.
      This increase the amount of earnings there is per share hence increasing the company’s P/E ratio.

    • @JennyOwnzable
      @JennyOwnzable 3 ปีที่แล้ว

      @Mark Brown did you ever learn what P&E means? I am learning too.

    • @carltonbanks5470
      @carltonbanks5470 2 ปีที่แล้ว

      Not just P/E. Any valuation metric really.

    • @mikafizz1022
      @mikafizz1022 ปีที่แล้ว +1

      What is the P/E ratio?

  • @SRGLIST
    @SRGLIST ปีที่แล้ว +2

    Wow so far I watch 4 videos and this explain all . Thank you 👍🏼

  • @cumbyjames
    @cumbyjames ปีที่แล้ว +2

    Amazing. Short and to the point. Very clear explanation

  • @derperderp9036
    @derperderp9036 4 ปีที่แล้ว +13

    And people are sitting in jail for shoplifting

    • @contenteater
      @contenteater ปีที่แล้ว

      Blue Collar Crime doesn’t pay.
      White Collar is where it’s at 💅

  • @daleeltoft3379
    @daleeltoft3379 9 ปีที่แล้ว +12

    OK so now we know how the buybacks work. Next can you explain why a company would do it? You kind of said it was to keep the price up, but why would they care? They already got their money at the IPO. Unless they know something and are planning some insider trading. So what the point of a buyback?

    • @marketplaceAPM
      @marketplaceAPM  9 ปีที่แล้ว +26

      Dale Eltoft They didn't necessarily get all their money. The execs and board members are also shareholders, so the higher the share price goes, the greater their wealth on paper. They can then borrow against that wealth, as can the company, using the shares as collateral.

    • @rmb_49ers
      @rmb_49ers 5 ปีที่แล้ว +2

      some execs get bonuses based on stock price

    • @ProfAzimov
      @ProfAzimov ปีที่แล้ว

      @@marketplaceAPM How about stock compensation

  • @bananikas9807
    @bananikas9807 2 ปีที่แล้ว

    Very, very clear and short, keep it like this

  • @mnm121314
    @mnm121314 9 ปีที่แล้ว +20

    oh, so this is what apple is doing... now i know :)

    • @arpankarmakar16
      @arpankarmakar16 3 หลายเดือนก่อน

      They recently bought back $110b of their shares this month in 2024.

  • @pppinto97
    @pppinto97 5 ปีที่แล้ว +3

    So what happens to the bought shares and who is the owner ? Are the shares bought up and cancelled out, which may , maybe decrease the market cap since number of shares multiplied by price of one share is market cap. The downside is, what is there's no demand for the shares irrespective of buyback or not. And what is promoter buyback ?

    • @Keshini.D
      @Keshini.D ปีที่แล้ว

      Some really good points

    • @pppinto97
      @pppinto97 ปีที่แล้ว

      @@Keshini.D Thanks for the compliment. Now answer it

    • @doyinsage
      @doyinsage ปีที่แล้ว

      They have a few options. They can decide to reissue the shares in the open market at a later date, retire the shares, or offer employment as part of a compensation/bonus program. I find the action to be shady. Some companies like he mentioned borrow money to execute this procedure.

  • @lenr7137
    @lenr7137 4 ปีที่แล้ว +9

    Just a way to increase shareholders’ profits at the expense of reinvesting in R&D, workers’ wages, etc. Greed personified.

    • @Thewu168
      @Thewu168 2 ปีที่แล้ว

      🤑

  • @randomfun7871
    @randomfun7871 6 ปีที่แล้ว +1

    I have 1 big question, lets say company announces buy back and they have 10 million outstanding share. They are thinking of buying back 100k shares. Who will get chance to sell that premium price out of 10 millions? What happens after buy back at premium and you still have those shares?

  • @AbsurdistPanda
    @AbsurdistPanda 8 หลายเดือนก่อน

    I love these so much

  • @Saidoromo2024
    @Saidoromo2024 3 ปีที่แล้ว +1

    Amazing explanatory power, Why not make selling stock options

  • @khaleelbbqowboy1370
    @khaleelbbqowboy1370 4 ปีที่แล้ว

    thanks, very informative, i didnt know what buybacks were before

  • @holbrook-ul9cf
    @holbrook-ul9cf 3 ปีที่แล้ว

    Excellent explanation

  • @Marcusmarcus318
    @Marcusmarcus318 4 ปีที่แล้ว

    Thanks, you made it very simple to understand

  • @mutondukalota6098
    @mutondukalota6098 3 ปีที่แล้ว +1

    Wow, can't believe this is still allowed. In my country this is restricted.

  • @TheBallers102
    @TheBallers102 3 ปีที่แล้ว +1

    Say a business plans to pay dividends In perpetuity wouldn’t it be obvious for the company to buy back shares not as a way to prop up the stock price but as a way to save money in the future?

  • @SacerKtracho
    @SacerKtracho 4 ปีที่แล้ว

    Thank you.. now I understand.

  • @plasticusclinic
    @plasticusclinic 6 ปีที่แล้ว +1

    Great video mate, can debt recapitalization refer to buying back stocks??

  • @davidalen9279
    @davidalen9279 4 ปีที่แล้ว

    Superb. Thank you

  • @vacayislife7828
    @vacayislife7828 6 ปีที่แล้ว

    Great break down enjoy the video. 👍🏿

  • @nurafiqahsaridaut2548
    @nurafiqahsaridaut2548 6 ปีที่แล้ว

    short and precise :) thanks!

    • @drimarket4877
      @drimarket4877 3 ปีที่แล้ว

      He is misleading you.. its short , all right. . But extremely far from precise. I admit , he said a few thing that were true , but most of them were wrong if not a lie .And more important is what he didn't say , either because he didn't know or left it out by design. TH-cam in the worst place to come and think you learn about how financial instruments work.. 1 word true , 99 false or lie or misleading. So , in the end , i would go as far as to say that this is disinformation .

  • @laurasalmieri6810
    @laurasalmieri6810 6 ปีที่แล้ว

    Well done!

  • @naveenvasubhaskar5180
    @naveenvasubhaskar5180 7 ปีที่แล้ว

    Thanks a lot!

  • @dlongstreet85
    @dlongstreet85 7 หลายเดือนก่อน

    This is what amc stock needs to do

  • @cryptictv3865
    @cryptictv3865 5 ปีที่แล้ว

    the end was unexpected!

  • @daleeltoft3379
    @daleeltoft3379 9 ปีที่แล้ว +1

    Poolplayler999, Your reasons make sense but like a 2 year old I need to ask why. #1 needs no further explanation, but #2 & #3 lead me to wonder why does the company care? Investors obviously care about EPS and thus that will affect demand but unless the company is selling stock (and here we know it is buying) what does it matter? If a stock is undervalued why would the company want to signal? Seems to me that the better move would be to play the market by buying the stock to resell when the price goes up. Why are companies so concerned about their stock price and what motives do they have for manipulating/affecting it?

    • @anjalisrinivas8964
      @anjalisrinivas8964 9 ปีที่แล้ว +2

      if the company feels their stock is undervalued they repurchase shares sometimes with excess cash generated by the company or by financing the repurchase through debt to gain leverage, to send a positive signal to the investors. the repurchase can increase EPS for a shareholder. the shareholders instead of getting cash as dividends that is taxed get greater income where essentially the tax burden is minimised..now coming to the point why a company would undertake buyback.. they do so to create a price floor. it's one effective way to take advantage of decreased market value to repurchase shares by timing it. this is generally done when management feels the shares are undervalued.

    • @neneklampir6664
      @neneklampir6664 7 ปีที่แล้ว

      Simple. So they (the board directors) able to do right issue in the future.

  • @roe2123
    @roe2123 4 ปีที่แล้ว

    How does a company benefit from higher stock price? After they create their initial shares and sell them to the exchanges, isn’t every transaction after that among those of us who trade?? Not sure I get how this helps them become a more profitable business.

    • @ProfAzimov
      @ProfAzimov ปีที่แล้ว

      Better access to debt and equity financing

  • @shubhamsahu4722
    @shubhamsahu4722 5 ปีที่แล้ว

    So the company will pay me my money(partly) to buy my share???
    Can anyone please explain?? Coz I already own that money which the company will pay me??

    • @jazzypoo7960
      @jazzypoo7960 4 ปีที่แล้ว +1

      A CEO makes most of his/her money by selling stocks.

  • @srijaljoshi3421
    @srijaljoshi3421 3 ปีที่แล้ว

    Can a company buyback it's shares in the dark pool?

  • @fr0xk
    @fr0xk ปีที่แล้ว

    Stocks that belong to companies not paying dividends despite being profitable or currently in a loss but promising future profits and dividends can be seen as resembling Ponzi schemes. The application of the discounted cash flow model, though justified by academic jargon, can be considered a means of legitimizing this Ponzi-like structure. Hypothetical assumptions, until realized, hold no tangible value, and relying solely on such assumptions does not substantiate any claims.

  • @staceya.775
    @staceya.775 4 ปีที่แล้ว

    Your accent 😍

  • @shekarsharma8217
    @shekarsharma8217 4 ปีที่แล้ว

    I wonder how many Marker pens you must have broken up till now

  • @frodedahl3494
    @frodedahl3494 ปีที่แล้ว

    share buybacks can be a very good way to return capital to long-term investors. A lot of misconception "out there" regarding share buybacks. It's not all about raising share price - it increases earnings per share and dividends per share for all future.

  • @drimarket4877
    @drimarket4877 3 ปีที่แล้ว

    This explanation is a little wrong. They 're not just hoping that after buying some of the stock back , the rest will create more demand. No. There's no HOPE involved here . But what is involved here is inside trading. Letting certain ppl know when yjou're doing it and how much you'll dump on the market. Then those ppl go to their ppl , tell them to buy , because they know the mother company will BUY BACK those shares as a higher price , and voila.. Bob is ur uncle , and you don't have to hope shit. You only think you know , but in reality you have no idea how murky are these waters...

  • @justinmorse1289
    @justinmorse1289 8 ปีที่แล้ว +2

    Wow is this guy ignorant. If a dividend stock is significantly undervalued, buying back shares can increase the dividend yield, even without a net increase in earnings. Also, in some markets, there is not always a smart investment out there for the company to make; pooring money into growth, when growth is too expensive is not a good idea. Sometimes the best investment for a company is the companies stock.

    • @andydavis3075
      @andydavis3075 7 ปีที่แล้ว +2

      Justin Morse but isn't that market manipulation and is a risk to investors?

    • @Earthandweather
      @Earthandweather 6 ปีที่แล้ว

      Justin Morse He is wise. You are ignorant. Ponder that my myopic friend.

    • @plasticusclinic
      @plasticusclinic 6 ปีที่แล้ว +1

      You can disagree with someone without calling them ignorant. It's called "different opinions". It is healthy for people in finance to have different opinions.

    • @tomberry66
      @tomberry66 5 ปีที่แล้ว +3

      @@plasticusclinic , the problem is that this person is ignoring the fact of ownership. It is rather like he slept through accounting 101.
      If a company has 100 shares of stock, then each share represents 1% of the company.
      If it buys back 50 shares of the stock, then the people who sell the shares get cash, and each of the remaining 50 shares now represents 2% of the company.
      The analogy to handbags is not accurate.

    • @tomberry66
      @tomberry66 5 ปีที่แล้ว +1

      @@andydavis3075 , It could be done in a manipulative way, or it could be done unwisely, but it is not inherently manipulative.
      The maker of the video ignores the fact that each share of stock represents ownership in the company. If a company buys back the stock, then each remaining share is more valuable because it represents a larger portion of ownership.

  • @Josh-kn5wn
    @Josh-kn5wn 6 ปีที่แล้ว

    this made no sense........

  • @TheDoombugg
    @TheDoombugg 4 ปีที่แล้ว

    So basically they buy their own product so stocks can grow? Nice

  • @forever_golfer1981
    @forever_golfer1981 4 ปีที่แล้ว

    A stock buyback is considered Treasury Stock to the layperson. FYI

    • @arnaudmeert1527
      @arnaudmeert1527 4 ปีที่แล้ว

      Companies can also do stock buybacks tho.