Patron, you said "why not have companies buy their own stock with their own cash". You also wrote that the "absence of insider free market buying has been the biggest sign of weakness this market has..."
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Buying back stock might be exactly what some companies plan to do. See story below.
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SEC Eases Rules
By Marcy Gordon
AP Business Writer
Friday, September 14, 2001; 6:09 PM
The Securities and Exchange Commission used its emergency powers for the first time Friday to ease restrictions on companies buying back their own shares in an attempt to smooth trading for the anticipated reopening of the stock markets Monday after an extraordinary four-day shutdown.
Under the new rules, the SEC said, corporations may buy back their own shares without meeting customary restrictions regarding the volume of shares and timing of purchases. The move will allow more money to be pumped into the market.
In addition, mutual funds may borrow from and lend to related parties, and accounting firms may provide bookkeeping services to help brokerage firms that lost records in the World Trade Center area without violating rules requiring accountants to be independent of firms they audit.
The SEC is not imposing new restrictions on short-selling, a technique used by investors who believe a stock’s price is about to go down, a point that the NYSE’s Grasso reiterated during the call.
Short-selling could exacerbate any kind of market plunge on Monday.
The short-seller sells stock he does not yet own, but is able to borrow from a broker. He then delivers the borrowed shares to the buyer, collects payment, and waits for the price to fall. Once it falls, he buys shares at the lower price and gives them to the broker to replace those he borrowed.
Earlier in the day, Cisco Systems Inc. announced plans to buy back $3 billion of its stock, the first major corporation to take advantage of a joint Washington-Wall Street initiative to prop up stock prices when the market reopens Monday morning.
Post staff writer Jerry Knight contributed to this report.
© 2001 The Associated Press |
