What is a share repurchase? When a company buys back its own shares at IPO prices When a company buys back its own shares at market prices When a company buys shares of its competitors, driving prices down
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What is a share repurchase? When a company buys back its own shares at IPO prices When a company buys back its own shares at market prices When a company buys shares of its competitors, driving prices down
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- Explain the concept of ‘buying back of shares by a company. What are the effects of such a buy-back? What are the advantages of a ‘buy-back’ of shares of a company? Give a few examples from the real-life situations where companies did a buy-back of shares. What were the reasons behind such a buy-back and how did it benefit the companies?If a company’s market price rises above the IPO price, does that suggest that the company left money on the table and thus received less for the shares than it should have received? If most companies do leave money on the table, does that indicate the IPO market is inefficient? explain5) What is a share buyback?A) An opportunity for the company to increase dividends without sending a signal that leads to a fall in the share priceB) An opportunity for shareholders to receive additional shares in proportion to their existing holding instead of the normal cash dividendC) A method by which the company can raise the level of borrowings on its balance sheetD) A mechanism by which the company buys a proportion of its own shares from investors
- Why would a company repurchase its own stock?When a company participates in a stock buyback program, it means that the company is buying shares of its own stock and taking them off the market. With this simple definition in mind, how would a company's stock buyback program affect its Earnings per Share?Explain what ‘short selling’ means and how short-sellers profit from a fall in share prices.
- Why might a company repurchase its own stock? A) It believes that the market undervalues its shares B) To offset dilutive effects of employee stock options granted C) To recognize an economic gain when the treasury shares are later sold for a profit D) To improve earnings per share by reducing the denominator E) All of the above is it just A and B or is it all of the above. On the day an IPO comes out, the market pricecan rise above the offering price or fall below thatprice. Is it more common for the market price toclose above or below the offering price on the dayof an IPO? If a company’s market price rises abovethe IPO price, does that suggest that the companyleft money on the table and thus received less for its shares than it should have received? If mostcompanies do leave money on the table, does thatindicate the IPO market is inefficient? How mightsystematic underpricing be explained? Has theamount of underpricing been constant over time?Explain.Why may a company wish to reduce its Share Capital?
- Indicate whether its TRUE or FALSE. Then give an explanation. Firms concerned with the sharemarket reaction to dividend announcements may adopt a “sticky” dividend policy.What are the factors that contribute to the temporary drop in a company's share price after a capital-raising plan is announced?Which of the following is a disadvantage of share ownership? Select one: a. Shares are liquid (can be converted to cash quickly). b. Information is widely available in the news and financial media. c. Transaction costs are low. d. Valuation is difficult.