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To: BGR who wrote (80326)	11/15/1998 2:20:00 AM
From: Gemini	Read Replies (2) \| Respond to of 176387

Apratim, Is it legal for a company to buy-back its shares and then sell those shares in the open market? If so, is there a time constraint between the buy and sell periods? Allan

To: BGR who wrote (80326)	11/15/1998 10:38:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Apratim, the analysis with which I provided you is based on Miller and Modigiani's proposition II. Basically, it is the reasoning well known among economists called the "irrelevance of capital structure". You made an error when you said: Assuming that company value remains unchanged before and after the buyback because that implies an increase in value to the share holder -- the very proposition you chose to prove! That assumption is incorrect. Look at how stocks behave ex dividend and you will see what I mean. Second, your submission of the use of extra debt is flawed because the individual shareholder can reproduce that to some extent by the use of margin (so-called home-made leverage). The conclusion that most observers have come to is that the capital structure of the firm is irrelevant to shareholder value within reasonable limits, but when a firm takes on extensive debt the added risk is often perceived as outweighing the benefits of leverage and so the total shareholder value declines. TTFN, CTC