Question

What happens to the stock price when the repurchase is announced? Would you expect the price to increase to $90? Explain briefly. Suppose the stock is repurchased immediately after the announcement. Would the repur- chase result in an additional stock-price increase?

Answer 1

The answers are no commitment, the price will not increase to 90 dollars, and there is no additional stock-price increase.

Step-by-step explanation:

The anoucement of a share repurchase is not a commitment to continue repurchases, so the information content of a repruchase annoucement is less stronger, so the stock value may not increase as much.

The value of any information in the announcement should be priced immediately into the stock. Thus, there should not be any additional stock-price increase.