Buyback stocks means that an issuer is carrying out a buyback action of shares that are already circulating in the public, so that the outstanding will be reduced, the buyback of stocks that are already in circulation will be recorded as treasury stock as a capital reserve and will not receive dividend distribution. Treasury stocks are also not added to shares in calculating net income per share. So if treasury stocks increase, the number of shares available in the secondary market (free float) will decrease. So it will appear as if earnings per share are increasing, it will also increase the percentage of share ownership, and it will appear that the issuing company's profits will increase. So if earnings per share increase but dividends per share decrease, investors must evaluate carefully, especially if the aim is for long-term investment. The fundamentals have not changed, but the dividend per share has fallen, which doesn't mean it's bad, it just means it's less profitable.
In general, stock buybacks will be carried out in stages or based on periods at predetermined prices. There is a possibility that treasury stock which is used as a capital reserve will be resold if the shares reach a predetermined target price. The difference or profit from treasury stock will be recorded as share premium.
Following are some of the reasons why an issuer buys back shares?
1. To prevent stock prices from falling drastically.
2. Increase earnings per share
3. Reducing the number of shareholders
4. As a capital reserve.
5. Given or as a gift to employees who excel.
6. Exchanged with securities from other companies.
In general, stock buybacks will be carried out in stages or based on periods at predetermined prices. There is a possibility that treasury stock which is used as a capital reserve will be resold if the shares reach a predetermined target price. The difference or profit from treasury stock will be recorded as share premium.
Following are some of the reasons why an issuer buys back shares?
1. To prevent stock prices from falling drastically.
2. Increase earnings per share
3. Reducing the number of shareholders
4. As a capital reserve.
5. Given or as a gift to employees who excel.
6. Exchanged with securities from other companies.
