Follow the Cash and Shares in a Buyback
Harbor Software has €500 million cash, 100 million shares and a €10 share price. It spends €100 million on a buyback.
Why this matters for beginners
Shares retired = spending ÷ price. This is general education, not personal advice.
Main explanation
Shares repurchased = buyback spending ÷ average repurchase price = €100 million ÷ €10 = 10 million shares.
After simplified cancellation: cash €400 million, shares outstanding 90 million, a 10 percent reduction.
At an average price of €20, the same €100 million retires only 5 million shares. Higher prices retire fewer shares.
The company gives up cash. A buyback doesn't create value just by moving money from the company to selling shareholders. Costs, taxes and price moves during execution are excluded here.
Example using a real company
€100 million at €10 retires 10 million shares, leaving 90 million and €400 million of cash.
- →€100M at €10: 10M shares.
- →€100M at €20: 5M shares.
Common beginner mistakes
- ✕Forgetting the company spends real cash.
- ✕Ignoring the price paid per share.
Key terms
- Shares outstanding
- Shares currently held by investors.
- Average repurchase price
- The average price paid per bought-back share.
Key takeaways
- 01Shares retired = spending ÷ price.
- 02Higher prices retire fewer shares.
- 03Cash leaves the company.
Check yourself
- 01€100 million at €10 per share retires how many shares?
- 02Starting at 100 million, what is the new share count?
- 03€100 million at €20 per share retires how many?
- 04What happens to cash, starting at €500 million?
Try the concept on a real company
Open a company in the Analyzer and ask which of these mechanics could explain its recent price moves.
Educational examples only. Not buy or sell recommendations.