The issuer action to do buyback from market is based on some reasons. One of the frequent reasons to explain the motivation of the issuer to buyback the stock is to increase the profit value per share (EPS). Therefore, the buyback is another alternative from the sharing of cash dividend which the company gives value to the investors.

Yet, the reason that the buyback will increase the EPS of the company is actually deceitful because actually buyback does not bring any fundamental improvement on the operation that can increase net profit. So that, the hike of EPS is evident because of lack of the outstanding shares, not the hike of net profit.

Meanwhile, the advance capital market, such as New York Stock Exchange (NYSE), where public share portion or free-float is relatively big, the buyback also frequently conducted as the defense strategy to prevent the takeover effort or the takeover from another company the issuer dislikes. Generally, the issuer owning high cash balance in the balance sheet often becomes attractive target for acquisition. Thus, the issuer targeted uses the cash to buy their own stocks so that making them unattractive to become the acquisition target.

Buyback usually trigger different reaction from stockholders. Usually, when the buyback announced, the share price will increase reflecting the hike of demand of the stocks in market. Furthermore, the hike of the prices also due to the hike of profit, which market values stocks higher than the rise of EPS after buyback.

In Indonesian bourses, issuers only release half part of the capital stock or the low free-float, sometimes buyback can be considered to be negative. Because by withdrawing half of the outstanding shares in public, issuers can take more control on the stock price movement in bourse. (zk-rs/ps-tr)

(S)