The danger of share buybacks
The danger is that share buybacks can be taken advantage as “insider trading” by management as it involves market timing –
hence the authorities must be more vigilant when it comes to the timing of share buybacks.
If a company buyback the shares and do not cancel them, are they waiting to unload when price is higher?
That is tantamount to trading in their own shares or having an investment portfolio. Is that part of the company’snormal course of business?
Can this activity account for a substantial amount of profit for the company?
How should analysts regard this profit – probably not enthusiastically as it is considered as a “one-off.”
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