BillyRayValentine

Why You Should Short Companies Doing Share Buybacks

Your example of a dilutive stock buy-back is worthless. You ignore the tax effect for simplicity, but by doing so you invalidate the entire exercise.

In your example, at a marginal tax rate of 20% or more the buyback is accretive. Which is to say, unless the company has NOL carryforwards, EPS will rise due to the buyback.