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by asdfj843lkdjs
5625 days ago
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When I say "artificial" what is mean is that if for example a turn-around CEO and/or team is compensated partly or largely in stock options then they can decide the best way to raise the stock price is not to grow sales and profits but to spend the company's cash reserves on a buyback. Other investors are often supportive of this as it gives them a profitable exit from the soon to rise stock. On its own, less supply leading to higher prices is perfectly natural. |
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Imagine that there are 3 partners each owning a 1/3 interest in a firm. If the firm decides to buy out one of the partners with company money, and that the partner agrees to this, this leave the other two with a 50% interest in the company. Nothing wrong with that at all and nobody has been forced to do anything it doesn't want. It's not artificial, the stock prices are higher because each share is now a bigger piece of the comapny.