eBay stock repurchase effects on stock price
Ebay has a sizeable shareholder approved stock repurchase plan.
Here are average share repurchase prices eBay made during past 9 months.
October 2007 $ 35.36
November 2007 $ 33.23
December 2007 $ 33.37
January 2008 $ 26.71
February 2008 $ 27.52
March 2008 $ 26.44
April 2008 $ 30.61
May 2008 $ 30.76
June 2008 $ 29.08
In the chart above, we have highlighted the most likely times that eBay purchased it’s own shares based on the price of eBay stock during that month.
It becomes obvious eBay usually initiates repurchase of it’s own shares following a major drop in price, effectively propping up it’s own share price. Is this legal? You betcha it is! It also appears to be a gold mine for those who are shorting eBay stock. Armed with this knowledge, one shorting eBay shares can predict when eBay will buy it’s own shares, usually following a relatively significant drop in eBay share price, thus this share buy back artificially inflaties the price (again). Next, the market takes over, the shares begin to drop again and those brave enough to short eBay shares continue making money.
eBay shares 52wk Range: $40.73 - $23.52
As sellers and buyers continue to defect from eBay due to it’s poor management decisions, more and more investors short this stock. Just take a look at the largest finance forum for eBay shares. It is full of upset eBay sellers and those who recently made pile of money shorting eBay stock.