BRIAN KANTOR: Share buybacks send important signals
In SA, the cash released finds its way to global growth companies rather than to local firms
The case for a company buying back its own shares is clear enough. If the shareholders can expect to earn more from the cash they could receive for their shares than the company can expect to earn by reinvesting the cash on their behalf, the excess cash is best paid away.
Growing companies have good use for the free cash flows they generate from profitable operations. That is to invest the cash in additional projects undertaken by the company that can be expected by managers to return more than the true cost of the cash. ..
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