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Reply #106: Actually, could be just the opposite [View All]

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NewJeffCT Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Feb-25-06 10:06 PM
Response to Reply #39
106. Actually, could be just the opposite
If a company buys back their own shares, it is often because they believe the value will go up in the future... meaning the company will have an improved cash flow when they sell the more valuable stock.

Getting rid of the poison pill provision *may* mean they feel they may be a target of a takeover, and buy purchasing their own shares, the company will increase in value more when somebody tries to purchase them -
meaning, if Choicepoint is selling at $40/share now, and somebody wants to buy them, they would likely offer more than the $40/share to make sure the Choicepoint board approves the sale. So, Microsoft comes along and offers $48/share for Choicepoint. The Choicepoint stock suddenly jumps up to somewhere around $48, meaning all the stock the company just purchased for $38-40/share is now worth $48. So, when you bought $375 million in stock at $40 share, you now have $450 million of Choicepoint stock.
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