>>66360979>>66361057Former bank wagie here who took a few corporate finance classes in college. It's been over a decade and I'm rusty, so might not get everything right.
The simple way of thinking about it is that a company originally has 100 shares, thus each share is worth 1% of the company. If company is worth $100 total, then 1 share=$1. Now that company has $50, they go out and buy 50 shares at $1 each. The company then burns the shares (similar to what crypto does) so that there are only 50 shares left. If the company is still worth $100, each of the 50 remaining shares is worth $2. This effectively is the same as just distributing the money to shareholders, but actually distributing cash requires each holder to pay tax on that "dividend" distribution, whereas burning shares is tax-free (and the company can avoid income tax on money they "spent").
https://www.taxpolicycenter.org/taxvox/stock-buyback-excise-taxes-what-we-know-and-dont-knowObviously there are a lot more complexities to this, but this is the simple explanation. Sometimes companies will keep the shares instead of burning and distribute them to employees/executive bonuses (i.e. instead of printing new shares and diluting everyone, they can buy back shares to give them out instead). Yes, printing is free, but it waters down existing shares and causes stock prices to drop (which makes investors angry), so it's better to burn some shares and make price go up. You might notice that once you "spend" $50, your company worth $100 isn't worth $100 anymore since you just burned money, and there's definitely an argument against buybacks as just wasteful pandering, but it ain't stupid if it works to increase prices.
Corporate finance goes a lot deeper, but simply put you can think of it as "buying" good publicity, or that the company has excess money it can't use for anything better (such as building a $20m studio like Holo). If you look at companies like Microsoft, buybacks are standard operating procedure since it shows confidence that they have plenty of money, and sometimes to an extent, perception of performance is more important than actual performance. Expectations drive stocks since they aren't representations of CURRENT value, they are representations of what people EXPECT them to do in 5-10 years from now. Even if an earning report is positive, if it is LESS POSITIVE than what people predicted beforehand, stock price will still go down (since pre-report price was based on the "more positive" guess people had rather than actual reality).
