Subject: Re: SIRI
DTB:
One might reasonably say that the operations of the company are worth about $900m, and the $100m cash pile is worth... $100m.

That would be reasonable as long as the company actually produces at least $100m more current value of future cashflow from having that $100m. That is to say, its keeping the $100m cash because it needs to operate at peak efficiency and NOT just because it earned $100m cash and doesn't know what else to do with it.

Now the company decides to repurchase shares....what has changed, is that I now own more operating assets...and NO cash at all

Which if the cash was actually needed for operations is a wash (they'll just have to raise $100m cash at a cost of ~$100m). But if the cash was just being parked there because the company had earned it and didn't know what to do with it, you have just seen the company INCREASE its IV/share by doing the buyback.

In effect, they have forced me to become a bigger owner of the operating assets by taking my $1m in cash and sending it out to other shareholders, in exchange for a higher proportion of the operating business.

They haven't forced you to do ANYTHING. You can sell $1m worth of your shares and wind up with the same mix of assets and cash you had before the share buyback.

But not because they ever returned me any cash - quite the opposite. If you were the only shareholder, you would have a point. Then share buybacks are NOT returning cash to shareholders because you are the only share holder and you didn't get the cash.

But you are NOT the only shareholder. So the company had to give that $100m cash it gave away to do the buyback to who? Could it have been other shareholders? I'm going to say yes since they used it to buy shares which typically can only ever be purchased from shareholders.

NOW if someone were to say "Share buybacks are pro-rate distributions of cash to all shareholders" they you would be right to say that is not true. But "share buybacks are distributions of cash to share holders", the only way you are going to get shares by giving $100m to some people is by making sure those people are shareholders before you give it to them.

Maybe if we said "share buybacks and dividends are two DIFFERENT ways of giving money back to shareholders" that would be something we could all agree on?

R: