Jamesian Philosophy Refreshed

There has been a good deal of talk lately about "stock buybacks." This is because, if I understand the situation, the Republicans want to give money to various businesses to get them through the coronavirus problem. The Democrats respond, NOT "subsidies are wrong in principle" (given the history, that seems an unlikely position for them to take, though these days anything is possible) -- rather their response is "we'll go along with the bail-outs to your buddies, so long as various strings are attached which we can pretend are pro-worker strings." I just want to say that on this point the Republicans have a case. Let's not talk or act as if there's never a good reason for a company to buy its stock back. Example: a management may have a good faith belief that its stock is undervalued by the market, and thus due for an upswing. It may also face a situation in which, before that upswing can happen, it faces a takeover threat from a corpor...

Thinking this through. What happens to the value of shares of public stock if the company buys some of the stock back in the marketplace? Think of it first as a simple accounting matter, and let's assume for simplicity's sake that the actual or potential buyers of the stock in the marketplace (who constitute the market demand) know and care about the book value on the balance sheet: that is, the equity as defined by the formula Assets - Liabilities = Equity . Suppose the company has 1,000 shares of stock outstanding, each selling for $50. Its market capitalization, then, is $50,000.  Now, it uses some of its own cash (an asset) to buy back some of the shares of stock. This decreases the amount of stock still available to a would-be buyer.  So if 100 shares are retired and 900 are left, as a first approximation -- assuming demand for the stock stays the same, we might well expect the value of those to increase to $55.55 per. BUT something else has taken place, ...