It increases demand for the shares which raise the price. It is a way of paying out the people that are most eager to leave.
For example, say you and I both owned a company together, each of us with one share. If the company had 100 bucks in the bank and an app that earned 1 dollar a month, the company could offer 60 dollars for a share. This gives us a point of discrimination where I might take the deal since I feel like I could put it to better use elsewhere.
Furthermore in some places capital gains are more attractive than dividends (I know, it is stupid. It has to do with the original purchase price and changing tax rates over the years). So what some companies do is both a dividend and a share buy back for different classes of shares both of which are convertible to a "true" share. That way you can determine which method you want to get you money out of the stock.
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It increases demand for the shares which raise the price. It is a way of paying out the people that are most eager to leave.
For example, say you and I both owned a company together, each of us with one share. If the company had 100 bucks in the bank and an app that earned 1 dollar a month, the company could offer 60 dollars for a share. This gives us a point of discrimination where I might take the deal since I feel like I could put it to better use elsewhere.
Furthermore in some places capital gains are more attractive than dividends (I know, it is stupid. It has to do with the original purchase price and changing tax rates over the years). So what some companies do is both a dividend and a share buy back for different classes of shares both of which are convertible to a "true" share. That way you can determine which method you want to get you money out of the stock.