No if management wants to repurchase shares you can sell yours or not. You can’t get a check in the mail that say we just bought your shares cya later.
An above post had a good point, Investor’s choices: After share repurchase, buy or sell After cash dividend, buy or sell, use/keep cash dividend More choices for cash dividend. Good call.
Dimes27 Wrote: ------------------------------------------------------- > An above post had a good point, > > Investor’s choices: > After share repurchase, buy or sell > After cash dividend, buy or sell, use/keep cash > dividend > > More choices for cash dividend. Good call. No matter how many times you say this, it’s still wrong. With div you have no choice about paying tax immediately. With both div and repo you have a choice of whether to sell or keep shares. If you think having the cash in pocket somehow ups your chances, then sell enough shares to get you what the dividend would have paid you. To drive the point home: repo gives you option of selling at the repo price or at market price. Div just allows the latter.
I disagree. The tax you will have to pay is a foregone conclusion. But you have a variety of choices of what to do with the money that remains. In all other situations, the choices for an investor after a share repurchase and cash dividend are completely identical.
I should say the choices are identical, even if the price of the stock changes. That has no effect on the choices that are available.
DarienHacker, The problem with this vague question and answer choices is that choice A does not tell us whether the choices available to shareholders refer to choices regarding tax decisions, or choices involving investment decisions. I inferred investment decisions, and chose A. I understand and agree with your reasoning behind not choosing A.
I agree with the other point about B being wrong as well, because B isn’t a valid statement in and of itself (without a qualifying statement), and how could an invalid statement be a valid reason for a particular action. But A is invalid as well, unless we extend the definition of choices to include a consideration of exacting what it is that we have choices about. It is a bad question.
^ Why can’t B be a valid statement, within the context of the question? If shareholders prefer capital gains to cash dividends, then the justification for repurchasing stock is certainly valid to me.
If you add the “if” it is valid. But proceeding on the basis of a blanket statement, which isn’t true in this case, it is invalid.
If I had to choose though, I would choose A, because there are a lot of miswordings/phrasings in these questions similar to this. And A seems fundamentally wrong.
delhirocks Wrote: ------------------------------------------------------- > I agree with E… > > Also, if you are in US, Dividends are taxed lower > than capital gains. Not true. Although they can be taxed at the same rate if they are qualified dividends. Currently long-term capital gains rates are 15%. I guess qualified dividends could be better than a short-term capital gain taxed at ordinary income tax rates.
I think the “if” is there: Think of the question as saying: “Which justification [the board of directors has] for [deciding on] repurchasing stock [which] is the least valid? Then choice “B” says” B) Shareholders prefer capital gains to cash dividends. This is same as saying that the board of directors knows (somewhow) that Shareholders prefer capital gains to cash dividends. Dreary
> Shouldn’t share repurchases affect Treasury Stock (contra account to equity)…and if so that > would change the capital structure of the firm…(D/E)… Share repurchase should not affect D/E because total equity is not affected by that…treasury stock goes up, and common stock goes down by same amount. Correct? Dreary