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GameStop Corp. Message Board

  • buybackerer buybackerer Sep 20, 2012 1:09 PM Flag

    Buybacks are not stock manipulation

    Buybacks occur when a company believes it's shares are undervalued . But they in effect make shares more valuable based on the earnings per share . The buyback is demonstrated in this example: would you rather own 100 shares of stock by a company that makes $1 a share and pays $.10 a share and which you paid $1 a share for ,or a 100 shares of a stock that makes $2 a share and pays $.20 a share and you also paid $1 a share for.In the case of GME there is a double benefit ,since the dividend has become an important part of GME's valuation. As I pointed out earlier , less shares means the company earns more per share , all things being equal(namely revenue and net income).And less shares means increased likelihood of increased dividends ,as the previously aportioned income set aside for dividends annually is spread among less shares. In effect it means dividend increases. Another point I had made earlier , was that GME had to work on the marketing and sales end of the business. While there are some underlying fundamentals to merchandising , it still remain an art form.Why some managers are better at it than others is not always clear. New game systems are a nice boost to sales for a company like GME , but it is a difficult thing to compete with the likes of Walmart, who undercut everyone on everything. Perhaps an online gaming strategy exclusive to GME might be something to pursue. But something more will be needed from GME in the future to compete with the likes of WMT and AMZN for the longterm.

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