Comment Re: As much as I hate Apple (Score 1) 187
The purpose of a buyback program is to BUY BACK stock to progressively regain a higher % of ownership of the company. The higher the stock price, the lower the effect of the buyback. Apple spent about 44 billions to buy back some of its stock over the last year. But it did not make a huge difference.
That's not the reason for the buy back. There are two reasons for a company to do a partial stock buy back.
1. Each share of a company's stock is a share of the company. If the company buys back shares, that makes each outstanding share worth a greater percentage of the company - in theory that raises the value of shares.
There are two ways you can give money back to shareholders - through a dividend and through a share buy back. Because of the way the US tax code is structured, dividends are taxed as regular income but long term sell of stock that appreciates is considered a capital gain with much lower tax rates.
2. Whenever shares are given to employees, it dilutes the value of existing shares making them less valuable. To counteract that, a company buys shares from the open market to counter act the effect.