Why do companies decide to buy back shares of themselves?
Discussion
Boosts stock price.
Increases share price. Its a way to return capital to shareholders.
That’s the most charitable explanation.
The least charitable is that the management are incompetent capital allocators who have no clue how to productively spend the money on R&D and are looking to juice returns as fast as possible so they can get their bonus based on stock price performance then bounce to their next finacialization racket.
Tax efficient way to give money back to shareholders. But also means the company has no better ideas for how to use the money themselves.
Yep. They are effectively backing themselves for growth better than the market price forecast or other investments.
Is this another way of saying that they're investing in themselves?
Effectively yes. Investing in themselves as opposed to other opportunities.
It’s often a market buy signal, however the market prices it in pretty quickly. It also means less shares for sale short term, and can drive prices up - however often the shares they buy back are not via public exchanges and instead private off-market deals.
As opposed to using the profits to pay dividends to shareholders, they use it to reduce the number of shares on the market, and also own more of their company.