Business Spotlight 08.2019

(Nancy Kaufman) #1
57

Fotos: final09, WinsomeMan/iStock.com; Gert Krautbauer


LANGUAGE 6/2019 Business Spotlight

accounts [E(kaUnts]
, hier: Bilanzen
blistering pace: at a ~
[)blIstErIN (peIs]
, in rasantem Tempo
bond [bQnd]
, Anleihe
buyback [(baIbÄk]
, Aktienrückkauf
earnings per share (EPS)
[)§:nINz p§: (SeE]
, Gewinn je Aktie
engage in sth.
[In(geIdZ In]
, hier: etw. vornehmen

forecast sth.
[(fO:kA:st]
, etw. prognostizieren
issue sth. [(ISu:]
, etw. ausgeben
level criticism at sth.
[)lev&l (krItI)sIzEm Ät]
, an etw. Kritik üben
publicly listed company
[)pVblIkli )lIstId
(kVmpEni] , börsen-
notiertes Unternehmen
repurchase sth.
[)ri:(p§:tSEs]
, etw. zurückkaufen

return [ri(t§:n] , Rendite
run out of sth.
[)rVn (aUt Qv]
, etw. nicht mehr haben
scrutiny [(skru:tIni]
, (Über-)Prüfung,
Kontrolle
share price [(SeE praIs]
, Aktienkurs
stock market
[(stQk )mA:kIt]
, Aktienmarkt
vulnerability
[)vVlnErE(bIlEti]
, Anfälligkeit, Gefährdung

LANGUAGE
TALKING FINANCE

Taking back


your shares


Unternehmen geben Aktien aus und erhöhen so ihr
Eigenkapital. Doch warum kaufen sie dann eigene
Aktien zurück? IAN MCMASTER erklärt es.
ADVANCED AUDIO

A


s The Wall Street Journal reported
recently, “U.S. companies have
been buying back their own
shares at a blistering pace for
more than a year”. Last year, US
companies alone spent more
than $806 billion on repurchas-
ing shares from shareholders.
Shares are a major source of exter-
nal finance for firms, a way of financing
growth and an alternative to borrowing
through, for example, issuing bonds. And
unlike bonds, which typically require in-
terest payments to be made regardless of
whether a company is successful or not,
shares offer a return that normally de-
pends on a firm’s profitability. Sharehold-
ers, whether individuals or institutions,
become part owners of the company and
typically acquire the right to influence its
policies.
Companies that are successful usually
pay dividends to their shareholders, who
may also enjoy capital gains through a rise
in the share price. Share prices can rise
without a company being currently prof-
itable, however, if investors expect future
growth and profitability to be strong.
Psychology plays a key role in terms of
forecasting what
other investors
expect. The British
economist John
Maynard Keynes
(1883–1946) lik-
ened the stock
market to a beauty
contest in which

IAN MCMASTER
is editor-in-chief
of Business
Spotlight. Read
his regular
blog on global
business at http://www.
business-spotlight.
de/blogs

Contact:
i.mcmaster@
spotlight-verlag.de

the judges (investors) have to judge not on the basis of what
they themselves think, but rather on the basis of what they think
“average opinion expects the average opinion to be”.
So, why might companies engage in share buybacks or repur-
chases? One reason can be to reduce the number of sharehold-
ers and consolidate the ownership of the company. In extreme
cases, companies may even buy back all their shares or find a
private-equity investor to do so. By “going private”, they can
avoid the scrutiny that comes with being a publicly listed com-
pany. Indeed, the number of listed companies in the US, at just
over 4,000, is only around half the number that existed in 1996.
Another reason for share repurchases can be to push up the
share price. If companies feel their shares are underpriced, they
might buy back some shares, reducing the number of shares
and pushing the share price up. This has the effect of increasing
a company’s earnings per share (EPS), a key financial indicator.
Share repurchases are often criticized, however, when used
to give a company’s accounts a short-term boost. Particularly
strong criticism is levelled at buybacks that are financed by ex-
tra borrowing, which can lead to future financial vulnerability.
Also, some experts see buybacks as a sign that companies
have run out of investment opportunities and don’t know what
to do with the cash they have generated.

AUDIO
You can hear Ian
McMaster talking
about share
buybacks and other
news topics on
Business Spotlight
Audio. To order, go
to http://www.aboshop.
spotlight-verlag.de

“BUYBACKS


ARE OFTEN USED


TO INCREASE


A COMPANY’S


SHARE PRICE”

Free download pdf