Baby buys it back: How share repurchase plans work

Why and how companies buy back their own shares - and what it means to their stock price

Investing, Money Media

This is what you might call a champagne problem. Imagine you have a company that earns so much money you don’t even know what to do with it. Profits keep rolling in faster than you can spend the cash on new offices, new employees and acquiring sub-companies. You consider investing the money in the stock market or maybe bonds, but once you do the math, you realize no other investment can give you a better return than your own company’s shares. Quite the quandary, isn’t it? This was the dilemma in which Apple (NSQ:AAPL) found itself. Investors watched as the company’s cash reserve grew and grew and grew – until we all had images of Steve Jobs and Tim Cook sitting on a mountain of cash à la Scrooge McDuck. “Show us the money,” said investors, their eyes glazing over with dollar signs. Certainly, that is the route many companies with excess earnings choose – spreading the love in the form of dividends to their investors. read more »