So you get the share repurchase thing, right? Companies think that Wall Street is nuts to be selling their shares at some stupid low price...call it 12 bucks a share. So the company buys back its own stock. But let's say it thinks that, in a few quarters, its new product will be blammo, and its stock will be rocking again. And even though it disclosed everything to everyone, the stock, still at 12 bucks a share, is a screaming bargain buy.
So the company wants to accelerate things. And in an ASR, what happens is that the company basically advances their broker/bankers a big chunk of cash, from which the bank draws to buy back shares in bulk, with the goal of doing so...quickly. Before word of the new flying car actually working and not killing people (like it did before) gets out.
The bank then goes out into the market and just aggressively buys shares, usually at a modest premium...but then, if it turns out that the shares later sag and the bank is able to unwind some of its derivative positions, essentially making the shares cheaper to have been acquired, it then rebates, or gives to the company additional shares in the buyback. The key idea here: the size of the pie shrinks, and the volume of pie given to each shareholder for the same percentage ownership-sized slice...increases.
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Finance: What is Earnings Per Share (EPS...33 Views
finance a la shmoop what is earnings per share or EPS? okay you know the lemonade
stand the one with 20 grand in sales and 16 grand in gross profits and yeah will [Balance sheet for Lemonade Stands R Us appears]
spare you the gross jokes you know the customer asks lemonade.. what the fly
was doing in his lemonade and yes of course she said the backstroke what else
would you expect from the people at Schmo really?
so after gross profits there were operating expenses like those and then
operating profits down here that 7,500 thing then there were taxes and yeah
there are always taxes we can grumble about and then finally net income aka [Net income appears on balance sheet]
earnings but then below earnings you'll see that there are a hundred shares in
this little company the founder owns 60 of them mom owns 10 the new stepdad owns
20 he was guilted into it by you know the divorce lawyer and Enrique the
gardener for some reason who has cleverly weaseled his way into the
families arts and minds owns the last 10 its annual report time and the investors
want to know what their earnings per share were so that they can all compare
relative performance on their investments right so the total earnings
of the company in this example was five thousand two hundred fifty bucks which
means that the earnings per share of our little lemonade stand company here or
that 5,250 figure divided by a hundred or 52.50 a share that's [EPS formula appears]
what each share earned if you divvy the company into a hundred little pie slices
or parts so yeah earnings per share equals earnings per slice o pie or wait
lemonade pie has that been done yet time for a new business venture what do you [A plate of lemonade pie appears]
think we're taking investors just call us please
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