Forums - Nintendo Discussion - Nintendo buys back 1 millions of own shares...But what does it mean ?

Hello,

I am lazy to find a source, but most fo you knows this is not a rumor. Nintendo does what we call "stock buyback".
We can assume, as everybody say, that it is a positive sign. But for me, who became recently a shareholder for Nintendo, it is still hard to concretly see what defines a "share" or "stock". Someone says me :"it is a little piece of the society". Ok but do you mean like this desk ? or this computer screen there ? or the 2 chairs there ? a quarter of the surface of this office ?

Here for this last event where Nintendo buys back its own shares, I can't see well what this concretly means, in a financial and mathetematical point of view. What can/will be their interest by this move. Make more profit ofcourse but how, by which mathematical lever they make money in buying their own property.



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https://www.investopedia.com/ask/answers/042015/why-would-company-buyback-its-own-shares.asp

This article should help



When the herd loses its way, the shepard must kill the bull that leads them astray.

Basically they believe their stock price is undervalued so they will do a buyback and offer the stock again at a later time when the prices have gone back up. At least that's how I understand it.



When the herd loses its way, the shepard must kill the bull that leads them astray.

It probably means that they think their stock is going to be more valuable in the future, so they want to buy it to resell it. It could also be a case where they don't own enough of their own company, and want to buy back some stock to prevent a takeover... but more likely the former.



zorg1000 said:
Basically they believe their stock price is undervalued so they will do a buyback and offer the stock again at a later time when the prices have gone back up. At least that's how I understand it.

A likely scenario.

JWeinCom said:
It could also be a case where they don't own enough of their own company, and want to buy back some stock to prevent a takeover... 

No, a buyback doesn't change anything in that regard.  It doesn't give Ninty power as a shareholder.  It just leaves fewer shares outstanding.

Ultimately, it means Ninty doesn't see a better use for their cash.  Buying back stock helps keep the stock price up, which is the basic purpose of a publicly traded company.  So, if Ninty has excess cash, but doesn't see a good way to invest it in the business, returning it to shareholders either through a dividend or buy back is the only way to go.   



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Nintendo always has large cash reserves. Could well be that they've decided that reserving the ability to re-sell these shares is more valuable that having the cash sitting around or in short-term investments.



They're probably done. Meshes well with all the Xbox fraternization. Mostly pachinko and Korean baseball for Nintendo from here on out IMO.



Chinese food for breakfast

 

The article zorg1000 linked to gives a very good description. 

The article kind of says this indirectly, but the main reason to buy back stock is to reward current shareholders.  A company can reward shareholders in two ways: dividends or increases in stock price (through buying back shares).  Either way the shareholder gets more value for their shares.  I suppose the other big advantage is that they get a good price on their stock if they think it is undervalued.  Perhaps a company would prefer to release the money as dividends if they think their shares are correctly valued or overvalued?  That makes sense to me.  Either way they are rewarding their shareholders though.



VAMatt said:

Ultimately, it means Ninty doesn't see a better use for their cash. 

Largely this. A lot of corporations have been sitting in this position recently.



So they rarify the quantity of shares available, making its more difficult to buy then so it lift up the value ?
My banker told me : "don't worry, with 14 units you will always find a buyer instantly, it is a tiny quantity". But then if someone wants to buy 14000 units in once, because Nintendo will have rarified it by letting 1 million less available today, the guy who want to buy 14000 units will have to put more money on the table to convince other holders to sell ? So this increases the selling cost of the share ?

Another question :
is this quantity, the quantity of buy/sell performed on the last open day of trade ? or is this the total number of share in the different quotation places ?



Current PB on Secret of Mana remake : 2h27 (2nd)
Strongest worldwide achievement on TGM : 1st European S13 rank
Fastest TI MASTER in Europe : rank Master V in 5min10
Current PB on Power Ranger (Game Gear) : 10min06 (World Record)

Non-geek activity : ThermalHungary

LET'S FACE THIS FACT : The Switch is the last physical video game system of the history who has a chance to beat PS2's sales.