IBM Message Board - Msg: 4409371

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Technology Stocks : IBM

IBM 309.39

+0.5%

Dec 8 3:59 PM EST

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To: Raj who wrote (3069)	5/11/1998 12:31:00 PM
From: Marty	of 8218

<< By buying back stock, IBM in effect reduces the total amount of shares outstanding to it's shareholders, hence reducing stockholder's equity.>> I think you got it backwards. The net equity (assets minus liabilities) divided by (fewer) shares outstanding will give you MORE equity per share. It is clearly to the remaining shareholders interest if the company buys shares at less than their real value as shown by the subsequent rise in share price. In other words, they see the value of their own shares as being better than all other alternative investments... and they have been proven right insofar as the stock re-purchases are concerned. Furthermore, they save the cash outlay for all dividends that would have been due on the stock that is now in the treasury. Lastly, they have now have stock that is worth more to use for current acquisitions instead of issuing new shares that (depending on the deal they make and how much return on investment all things considered) would reduce shareholder equity. As far as I am concerned, the more stock they buy, the happier I am for all the above reasons as well as soaking up stock that would have otherwise driven down the value on my shares. BWDIK

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