Over the past decade, companies especially US companies have been constantly conducting share repurchases. As we all know, in theory share repurchases is definitely a good thing as it shows that company’s management feels that current prices do not justify the true value of the company. Furthermore, share repurchases increases shareholder’s value as well given the decrease in outstanding shares. However, this might differ in practice. As investors we should always question ourselves if share repurchase is truly the ideal move by management.

History:

Henry Singleton, C.E.O. of Teledyne is also known as the father of modern stock buyback. During the 1960s, he built up Teledyne largely through using his very high P/E shares of 20x to acquire a wide range of businesses trading at lower multiples of ~12x. Throughout the entire period of company acquisitions, nearly 130 were funded via stock deals. During the second phase of ......