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Non-Tech : PETM - Petsmart
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To: HandsOn who wrote (1418)9/2/1999 8:41:00 PM
From: EL KABONG!!!  Read Replies (2) of 1508
 
HandsOn,

Just because the company (any company for that matter) announces a share buyback, that news in and of itself does *not* obligate them to buy back any shares. It merely means that they are authorized to do so should such an action be deemed suitable by those who advise the company on its' financial health.

Many times just the announcement of a possible share buyback will spur potential shareholders that sit on the fence into purchasing shares now (before any anticipated price rise) and the company never needs to spend its' capital in the buyback program. I'm not saying that this is what PETM will do; merely that this scenario is within the realm of possibilities.

What does a share buyback program really tell you about the company? Well, it should tell you that they are saying that they have this pile of money (capital) and they have no better use for it than to buy back shares, which may effect a rise in the share price. No guarantees. Wouldn't you think that this capital might be better invested in the company's various business endeavors? I don't know the answer one way or the other. But a share buyback announcement is not a reason for me to buy a stock or to return to a stock. I want to be in a company (any company, not just PETM) because they have strong business fundamentals, strong business growth, excellent management and reasons like that. Any mediocre business can buy back shares. Buying back shares does nothing to improve the business model.

KJC
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