When doing research I find share buybacks to be a plus if it’s a company I’m already interested in. I also find it a plus if it’s a company I hold, this may amplify my interest in expanding this position.
I’m torn on share but backs, yes it’s a way of returning capital to shareholders but I happen to see it as a way of juice the stock price to boost management compensation. I’d rather a company find new revenue streams to explore or pay it as a dividend.
Sometimes I think its just so management can say the company is undervalued!
Dermot Smurfit, Chief Executive Officer of GAN, commented:
"We continue to believe that the best use of our capital to drive long-term shareholder value is centered around our strategic growth initiatives such as investing in our technology, supporting client launches and building out our Super RGS content portfolio and omnichannel GAN Sports platform*. However, we also recognize the value opportunity that has developed in our stock and want to be prepared to act opportunistically during periods when the share price becomes significantly dissociated from our future earnings potential. T*oday’s announcement provides us with an effective tool to do exactly that, support our stockholders and drive long-term balanced returns.”
For me, the purpose of a stock buyback strategy should be higher than the face value objective of increasing shareholder value. Because while it can be theoretically argued that it’s the best form of compensation for existing shareholders, this does not account for non-existing shareholders viewing stock buybacks with suspicion one they realise it’s happening, and being less likely to invest in the future on the basis that it might in practice generate less return than the same company using that money in other ways.
Used as a strategy to for instance, prevent a takeover, or to cover strange situations such as the recovery from the pandemic where supply chains will take time to catch up therefore earnings are down but you don’t actually want to downsize, then yes, they’re great. But as a means to an end, overrated.
For me I would rather a company pays off debt. Share buy backs may mean they can borrow at lower rates in the future. But, lower debt could help protect dividends in lean times. I guess people’s view will depend on their invest tactics.