> a company which executes a share buyback will have no change in its stock price... this is also exactly equivalent to distributing profits in the form of a dividend
This is false (conditionally). Most valuations look something like: earnings x growth + cash. If you have cash that you cannot reinvest at the same ROI that you have been growing at, you can increase shareholder value by removing the cash element, since it's dead weight. A buy back is a way to invest that cash at the same ROI that your company is growing at. A dividend would require the investors to re-invest that cash and get the same ROI that the company is growing at.
This is why it make sense for large, fast growing companies to buy back their shares and for large, slow-growing companies to issue dividends.
This is false (conditionally). Most valuations look something like: earnings x growth + cash. If you have cash that you cannot reinvest at the same ROI that you have been growing at, you can increase shareholder value by removing the cash element, since it's dead weight. A buy back is a way to invest that cash at the same ROI that your company is growing at. A dividend would require the investors to re-invest that cash and get the same ROI that the company is growing at.
This is why it make sense for large, fast growing companies to buy back their shares and for large, slow-growing companies to issue dividends.