Impact of Share Buybacks on Valuation

Medium Equity Markets And Instruments Common Shares

During an earnings conference call, the CEO of a publicly traded company announces a new share buyback program. Investors and analysts are keen to understand the implications of this move.

How would a significant share buyback program primarily affect the valuation of the company's common shares?

It decreases the company's earnings per share because the number of shares increases.

It typically increases the company's earnings per share because the number of shares outstanding decreases.

It has no impact on the share price as it is not related to the company's profitability.

Hint

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