Managerial Finance - Article Example

the last couple of trimesters the crude oil prices have been consistently going up which is sign that the industry is in recovery and there are good profits to be made for players such as Vaalco Energy. The latest press release from Vaalco Energy announced that the company intends to implement a share buyback programme worth $10 million. This paper analyzes the strategic move of initiating a share buyback programme at Vaalco Energy. A share buyback programme refers too a corporate initiative to purchase its own shares from shareholders that are selling the common stock in the open market.

These programs have a money cap which indicates the termination of the programme. In the Vaalco Energy case the cap of the programme is $10 million, which means that once the company is able to purchase that amount equity the share buyback programme ends. Once the company buys back these stocks the investment asset can be consider treasury stocks. Treasury stocks are created when a company does a share buyback and purchases its shares in the open market (Investopedia, 2009). The company intention on purchasing its own stocks should not have any impact on the industry as a whole.

This it is not made for any strategic purpose associated with the external politics of the company, nor does it impact the competitors in any way. A share buyback programme is an internal financial management decision that the executive staff of a company selects with the authorization of the board of directors to take advantage of favorable market conditions. Share Buyback programmers should be initiated only if an internal valuation of the company’s values determines that the corporation’s stock is trading below expected value.

When an investor’s sees that corporation initiates a buyback program the general belief is that the stock price of the company should be going up soon due to the fact that the firm has determine the company is trading below expected value. The initiation of such a