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How to Benefit from Share Buy Back and Stock Split?

Posted By On 3/01/2011 12:15:00 AM Under , ,
Share Buyback
It is the repurchase of shares by a company in order to reduce the supply of shares in the market. Companies generally do so to increase the value of shares still available or to eliminate any threats by shareholders who may be looking for a controlling stake.

One can get benefitted with a share buyback by holding to the stock provided the stock is being bought at higher level. However dynamic individuals can sell in open market as stock generally reaches with in 5% of the price if the stock is priced on the higher side in stock buyback.

Stock Split
It is a corporate action in which a company`s existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split. It is generally done to unlock the value of the shares.

One can benefit in stock split by being dynamic as immediate after stock split the liquidity rises and thus people trade with a state of euphoria as they see price at lower levels, though the same is not in actuality in ground. Thus make use of euphoria to book profit in intitial days of stock split before people realises and comes to terms with the reality.
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