THE STOCK PRICE DYNAMIC MODEL DURING SHARE BUYBACKS
The article is devoted to the analysis of the quoted prices response to share buyback procedure. It considers the theoretical and simplified model of share buybacks. The research also reflects on the possibility of sharers and external investors’ earnings on share buybacks. Generally, share buybacks are followed by share costs increase and is considered by the investors as a buy signal. This happens regardless of the reasons for buybacks, which actually influence further changes of the price. Thus, the article also considers the reasons for share buybacks, such as price support and the prevention of hostile takeover, as well as excessive liquidity and cash surplus reduction, with the increase of earnings per share and profit gaining due to lack of company’s shares at the market. The study describes the particularities of share buybacks procedure in the company GMK Norilskiy Nikel. After a theoretical overview of share prices behavior as a result of share buybacks the author brings the results of the experiment, based on the data obtained in Russia between 2002 and 2015. According to the research findings of the 173 examinations, the author proposes the dynamic model of prices per share in the process of share buybacks. It allows the investor to make decisions on the moment of time that appears more suitable for buying company’s shares or offering a buyback. Moreover, the model represents the whole picture of each share’s volatility and shows the results of company’s capitalization after it announces the buybacks and immediately after the buyback procedure.