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ListerOfSmeg on 29 January 2014
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superhippy420 said:
Somini said:
Why are they buying stock back? Simply recalling it is not an option? Also does mean we have the WiiU overtracked? As stock must be very high for them to decide something like this!


Companies generally buy back shares of stock when they want to increase the price of the stock, due to their being less supply.  It's a legal way to try and manipulate the market, so that when the shares go up they can resell them for a higher price.   It's legal in the U.S. because they are still assuming the chance to have it go down by even more.    It also is done to increase stockholder confidence.  If Nintendo is confident enough to buy its own stock, then more people will want it because they think Nintendo knows something that we don't know about the future.   

Never have a read a more incorrect analysis of a company buying back stocks then this. Legal way to manipulate the market?

Okay. Let me see if I can explain this to you. A company starts out by issuing 100k shares of stock at 10.00. Now those people that buy those stocks are share holders. They get a say in what the company does based on how many stocks they have. They get a part of the profits the company makes as share holders.

Buying the stocks back, which is them buying part of their own company back, is not immoral, unethical or any such nonsense and its not going to get people out buying stocks because stocks are not limitless. Yes it will increase the value of the company because every stock the buy back is a greater % of the company that they own themselves. It means they pay out less to shareholders, have less people to report to, etc.