SHARE buy-backs are undoubtedly one of the reasons why the US stock market is currently strong. Companies spent around $80 billion on them in the first quarter; not as high as the $150 billion or so back in 2007 but a big dollop of cash. Many people argue that the low dividend yield on the stockmarket is irrelevant because share buy-backs are such a big source of cash for investors.
But why are companies buying back shares? Andrew Lapthorne of Societe Generale has been crunching the numbers. If shareholders were benefiting from buy-backs, then the overall number of shares would be reduced; the same profits would be distributed among fewer owners.