And why do people compare using them to the Great Depression stock crash? I don’t understand and I tried.
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A stock buyback is when a company uses their cash on hand (ie. money from profits) to buy shares and reduce the number of shares that are owned by shareholders. Reducing the number of shares means even flat earnings result in higher earnings per share, so the stock price should go up.
Imagine there was a company with 100 shares. They do a buyback of 10% of their shares. With only 90 shares outstanding after the buyback, each one is now worth 1.11% of the company’s total value instead of 1%.
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