Kontrol Technologies Corp N.KNR

Motives behind share buybacks

[KNRsqueeze2021]

The Motives 

Why do companies buy back shares? A firm's management is likely to say that a buyback is the best use of capital at that particular time. After all, the goal of a firm's management is to maximize return for shareholders, and a buyback typically increases shareholder value. The prototypical line in a buyback press release is "we don't see any better investment than in ourselves." Although this can sometimes be the case, this statement is not always true.

 

There are other sound motives that drive companies to repurchase shares. For example, management may feel the market has discounted its share price too steeply. A stock price can be pummeled by the market for many reasons such as weaker-than-expected earnings results, an accounting scandal, or just a poor overall economic climate. Thus, when a company spends millions of dollars buying up its own shares, it can be a sign that management believes that the market has gone too far in discounting the shares—a positive sign.

[felker04]

I agree, but they are not buying back shares yet. They just said they could. It is a nice strategic move for the share price. It also gives them a bit more leverage in the future. But they aren't buying yet. Let's see what happen, hope it is a good sign.

[canyousayiii]

Bamg on, Felker. Just getting another tool for their toolbox. Long term shareholders will be able to see how these can play out so that when they see some other play announce an NCIB they will know more about it and not make wrong assumptions. Sales news is infonitely more important so if there was some government purchasing tied to the funding and this budget, we should hear about it in hours or