Can any financefags explain share buybacks to me?

Explain to me like I'm a peasant.

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Company buys its own shares on the open market. This decreases shares outstanding, which increases earnings per share. In theory it could also increase dividend per share and price per share due to lower supply of shares outstanding. In practice it usually just means mgmt is out of ideas for growing the business and doesn't know what else to do with excess cash.

Isn't this bad?

Share buybacks are a way of returning profits to sharehodlers. The other way is dividends. The benefit of share buybacks is that it delays taxes that must be paid.

Ideally share buybacks are done when the stock is undervalued, if it is overvalued this is just stupid.

Yes because they do it with their 1% interest loans. they basically have money printed for them and then once the market tanks they own tons of their own stock that they can sell back to you on a "rally"

Tech companies are hyperinflated. They will crash violently and suddenly and there will be a few years of bear. Don't get greedy. Take profits and buy low. Patience.

When a company buys its own shares back the shares are deleted from existence. This increases the ownership % of the shares that are left in existence.

But, who determines if the stock is undervalued? Ofcourse from the perspective of company owners, the stock is always undervalued because their perception of reality is skewed.

There is always an element of subjectivity when valuating a company. Hopefully the valuation and purchase decision is done by someone who is sane and has the shareholders best interest in mind.

I own shares in a holding company which is valued at 0.85 times the current market price of its assets. From my perspective share buybacks are basically printing money because the stock is valued under the current market price of its assets.

If the stock traded over the market price of its assets I wouldn't want the company to buy back shares. I hope my ramblings provoked new ideas in you :)

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>valued at 0.85 times the current market price of its assets

What does this mean? How is this decided? Who decides this? What kind of scientific investigative methods lead to this figure?

If the market cap of a holding company is 85mil and it owns stocks in other companies worth(the latest price at which the stocks traded) 100mil then that means the holding company is valued at 0.85 times the value of its holdings. 85/100 = 0.85

The value of its holdings is determined by the stock markets. The latest price at which the stock exchanged hands.

By buying this holding company I get to buy its assets at a discount, if I bought its assets straight I would pay the full price.

There are books written by people who are much smarter than me about how to value assets. I would recommend you read or listen to audiobooks about this topic if it interests you. Fundamental/Value investing is my style.

I invest in unknown small cap stock because then I don't have to compete with big investors as much.

Splits are good to. Sometimes mergers are another good thing. Depending on the merger details sometimes you can backdoor your way into getting some high value stock, cheap.

it's literally just publicized market manipulation in lieu of dividends to avoid taxes. prove me wrong

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It delays taxes to the point when the shareholders decide to sell their shares. Yes. I see nothing wrong with this. Taxes should be paid when the investor takes the money home to spend it.

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it's like a binance token burn though. I agree nothing wrong with it per se, although it seems like it would be a delicate art to decide and execute these types of things as well as communicate them fairly, as well as measure the impact in isolation like you can with a dividend. that's fine. these people who do this are the smartest guys in the room, I'm sure they have good reasons behind it all

>shareholders
You mean insiders

When a company buys its own stock and deletes them this increases the ownership percentage % of the shares that remain. This creates value for shareholders.
Shareholders that didn't sell their shares now get a bigger percentage of the profits the company creates for themselves.

Can you potentially know that a stock will tank and then buyback the shares before it tanks such that the other investors get stuck with a high percentage of low value stocks?

I wouldn't say the company has no choice but to buy back, especially at these prices. When a market is less dominated by monopolies like now, excess cash should more logically go into R&D in order to stay competitive

Or dividends.

Like having a 747 in a building

why
company is already drowning in cash. No need to raise capital by scamming retail investors or paying them more and funding a possible competition.Burning the money would make more sense. Funding random foundations for PR makes more sense. Shareholders are pay piggies. Useful idiots, and with how cheap money currently is, not needed