RE:RE:Eh management...can you live with modern times ?Buying back stock (creating treasury shares) is a bit of a mixed bag. If the enterprise is in a cash crunch or can reasonably forecast a pending cash cruch, it would be insane to swap out equity for debt in the capital structure. If, however, the enterprise is flush with cash and perceives no liquidity risks on the horizon, the process of increasing their leverage within their capital structure can be a wise move.
Since equity investors invariably require a higher rate of return than debt investors, anytime you can increase leverage you are lowering the WACC (weighted average cost of capital) for the firm. Lowering the WACC raises the NPV (net present value) of all the projects of the enterprise and should, theoretically, increase the share price since the share price represents the NPV of all future streams (i.e. dividends) of cash flow to the stock investor. As the value of the projects go up, in theory the future streams of dividends should go up and hence the price of the stock should go up.
Everything here is theory and as you alluded to, in reality most participants in the stock market are just hustlers looking to make a quick buck and know diddly squat about finance or financial theory.