In today’s briefing:
- Not Promptly Retiring Treasury Stock Has Increased the Market Cap of Japanese-Style Calculations
Not Promptly Retiring Treasury Stock Has Increased the Market Cap of Japanese-Style Calculations
- The fact that few companies promptly retire treasury stock is the reason for the large gap between market capitalization including treasury stock and market capitalization calculated without including treasury stock.
- It’s odd that EV/EBITDA of a company will be smaller after cancelling treasury shares than before, but this shouldn’t be too much trouble for institutional investors who analyze it closely.
- Although this gap may widen for more companies as more cross-shareholdings will be bought back with treasury stock, the increase in share repurchases is a favorable development.
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