Hi Victor,
Under insider trading in the management quadrant, it is mentioned that share buy-back by management is generally a good thing as it showcases the management’s confidence in the company. However, I don’t fully understand why a buy back at a low price is better than at a high price. Has this to do with the “signals” it would give to analysts/market if the shares are bought back at a high price and that the management could be intentionally driving up the share price?
Rgds,
Carolyn
I would think that buying back at a low price indicates some form of turnaround/boost, or generally a positive sentiment or expectation in the performance of the company ahead.
Also, buying back shares at a low price when it is undervalued indicates better capital allocation behavior of the management. Purchasing share prices at overvaluation is generally a more unwise and unsound financial decision, it is like not wanting to purchase $1 for 50cents but you would love to purchase $1 for $2 instead.
Thanks JR