From time to time, many companies engage in "stock buybacks" in order to increase the value of their stock, and I got to thinking about this practice yesterday.
More or less, you take money in quarter 1, buy back the stock, and then the money you spent in quarter 1 gets taken off profits in quarter 2. You reduce the number of shares and increase the profit/share in quarter 1, but then take the expense later, decreasing your profit/share at that time. Of course, you ignore that expense in your pro forma accounting sheets, falsely telling investors that your P/E is actually quite healthy.
One wonders how many other activities of corporate finance offices are shell games, and how much more prosperous we might be if we didn't play them.
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