Southwest Question RE: Shares

[wooferdog]

WN recently announced a share repurchase program of an additional $500 million.

Does anybody know if those repurchased shares are held in the name of Southwest, -or- do they just go away (in other words, does the denominator decrease) ?

I'm asking b/c I want to know how effective they can fight off an acquisition. Texas Pacific Group lost the Qantas thing, is losing the Iberia thing, and is now losing the Ilitalia deal. They have mucho $$$ and are looking, and WN shares are at record lows.

Thanks for your answers.

 

[radarlove]

They go away.

The best way to fight off an LBO is to get the stock price to grow.

 

[momalley81]

They go away.

Untrue.

WN can either hold the stocks for later resale or they can retire them. It is up to WN but they don't just "go away"

 

[radarlove]

They do "go away", that's the point of a buyback. They can always issue shares again, diluting the common.

A buyback doesn't change the value of the company, but it does change the value of each share of stock.

LUV has done a ton of buybacks, one wonders where the share price would be without them.

Go learn how to read a balance sheet and get back to me.

 

[momalley81]

They do "go away", that's the point of a buyback. They can always issue shares again, diluting the common.

Go learn how to read a balance sheet and get back to me.

No they dont just go away.

From LUV's press release today:

Repurchases will be made in accordance with applicable securities laws in the open market or in private transactions, from time to time, depending on market conditions, and may be discontinued at any time. Southwest has approximately 774 million shares of common stock outstanding. Any shares that are repurchased may be retired or used to fund the Company's Employee stock plans.

From wikipedia in reference to Stock buybacks:

After Buyback

The company can either retire the shares (however, retired shares are not listed as treasury stock on the company's financial statements) or hold the shares for later resale. Buying back stocks reduces the number of outstanding shares. To see this, note that accompanying the decrease in the number of shares outstanding is a reduction in company assets, in particular, cash assets, which are used to buy back shares.



Go learn about what the heck you are talking about and then you can get back to me.

 

[radarlove]

Well, anyone that uses Wikipedia as their financial resource is pretty ignorant to start.

Here is the point: LUV is attempting to reduce the total number of outstanding shares, to allow EPS to grow. Yes, this means that the shares "go away", unless they are re-issued. This includes options, etc. The shares go away, they're off the street, they're no longer for sale, they aren't traded, let's see how else to put it...they go away.

Later, the company can reissue them, or resell them to the public, but it's not as if they keep these things in a safe, well, even if they do it doesn't matter. The only reason to repurchase shares is to get them out of the market, to reduce the total number of outstanding shares.

What is the world do you think repurchases do?

 

[CYQQ]

I have to agree with momalley on this.

I'm not saying that WN does this but it is a favourite trick of tech companies. Buy back shares and reissue them as stock options to management and employees. The total float remains the same.

A direct transfer of value from shareholders to management. I'd rather see a dividend increase.

 

[Bill Nelson]

A large amount of the stock is given out as profit sharing. ESPP is another way for the stock to be dispersed to the employees. SWA's management is amount the lowest paid in the industry. They aren't doing buybacks to pasd their own pocket.

 

[radarlove]

Giving the shares back is the same thing as issuing new shares. Think of the point of this exercise: more than $1 billion in shares will have been repurchased by the end of this year. Market cap for LUV is around $12 billion. Let's call it close to 105 of outstanding shares will be removed from the market.

If they want to turn around and re-issue those shares to the market through option or employee purchase plans, you have to do the math to figure out if it counts. Divide the number of folks who choose to exercise options or purchase some company stock by $1 billion dollars and get back to me.

 

[momalley81]

Well, anyone that uses Wikipedia as their financial resource is pretty ignorant to start.

Here is the point: LUV is attempting to reduce the total number of outstanding shares, to allow EPS to grow. Yes, this means that the shares "go away", unless they are re-issued. This includes options, etc. The shares go away, they're off the street, they're no longer for sale, they aren't traded, let's see how else to put it...they go away.

Later, the company can reissue them, or resell them to the public, but it's not as if they keep these things in a safe, well, even if they do it doesn't matter. The only reason to repurchase shares is to get them out of the market, to reduce the total number of outstanding shares.

What is the world do you think repurchases do?

Ok radar, lets review what you have stated so far in this thread:

First of all you make the incorrect statement to a poster that the shares of WN that is going to bought back will simply "go away".

I then state that that is an incorrect statement and correct you.

Instead of you realizing the error you had made (which is really no big deal) you come back with a brassy comment for me to "go learn how to read a balance sheet and get back with you."

Well, since I am an active investor and know what I am talking about I decide to provide proof. I then use LUV's own press release of the buyback. To further prove my point I also go to wikipedia. (Not because I use it as a financial resource but because it is convenient.)

I then provide you with two clear examples that you are wrong. Still you just dont seem to get it.

Shares of stock just dont "go away" They are either retired or they are held on to by the company and then reissued. A company has to get all this stuff cleared by the SEC. You can't just say; "Hey we feel like issuing a couple million shares today." And poof it then happens.

If the company buys back some of its stock and then decides to use them as part of the company's ESPP or wants to later sell them to the public those shares will still be valid and in-force. If the company decides that they no longer want the shares they can then retire them. In that case every remaining outstanding share has a larger percentage ownership of the company.

Again shares just don't "go away" when they are bought back. It doesn't work like that.

If you had any freaking clue what you were talking about then we wouldn't be having this discussion and you wouldn't be looking like a fool.

BTW, instead of the slinging mud at me when I tried to correct you, you could have at least done a little research a found out for yourself that you are incorrect. But I guess that can't be done on FI. Where everyone is an expert in their own mind.