In the A** market, it is a common capital operation mode for listed companies to repurchase their own companies. However, why do some listed companies not choose to buy back**? It's a worthwhile question.
First of all, we need to understand the meaning of repo. Repurchase refers to the repurchase of a certain amount of the company's outstanding issuance from the market by raising funds from the listed company with its own funds or through the issuance of bonds. Through buybacks**, listed companies can increase their share price, increase earnings per share, improve their financial structure, reduce shareholders' equity, and more. However, some listed companies do not choose to buy back** for the following reasons:
1.Financial pressure is high.
For some listed companies with tight capital chains, buyback** requires a lot of money. If the company needs to use these funds to maintain normal operations or make other investments, then the buyback** may put greater financial pressure on the company.
2.Shareholder equity decreased.
Buybacks** result in a reduction in shareholders' equity, which in turn lowers the company's total assets and net assets. This may affect the company's ability to raise capital and pay its debts, so companies need to weigh the pros and cons.
3.The effect of the buyback is uncertain.
While buybacks** can boost stock prices, this effect is not guaranteed. If the market does not approve of the company's buybacks, or if the company's fundamentals do not improve, the effectiveness of buybacks** may be greatly reduced.
4.Restrictions by Laws and Regulations.
According to the provisions of relevant laws and regulations, the repurchase of listed companies needs to meet certain conditions and procedures. If the company does not meet the relevant conditions or violates the relevant regulations, the buyback may be halted or penalized.
The main reasons for the general implementation of the ** repurchase policy by foreign listed companies are as follows:
Increase EPS and improve the profitability of the company: One of the reasons for buybacks by listed companies is to increase earnings per share (EPS) and improve the profitability of the company.
UnderestimatedWhen a company believes that it is undervalued, it will choose to buy back as a way to increase the intrinsic value of the company.
Financial flexibility: Buybacks** allow companies to have more cash, which increases their financial flexibility.
Signaling: Through buybacks**, companies can communicate their confidence in the company's prospects to the market, thereby stabilizing the share price.
Defend against hostile takeovers: Buybacks** can reduce the number of shares outstanding, making hostile takeovers more difficult.
Equity incentivesBuyback** can be used as an equity incentive to encourage employee loyalty and motivation.
The above are only part of the reasons, in fact, the specific situation of each country and region may be different, such as regulatory policies, market environment, company culture, etc., will affect whether the listed company chooses to buyback**.