Business Spotlight – Nr.6 2019

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”