Hewlett-Packard and Apple, Inc., two very successful technology firms, show no investment in their own shares (treasury stock) on their 2008 balance sheets. Bear Stearns, on the other hand, was reported in a 2004 edition of the Wall street journal to have launched a $1 billion stock repurchase plan. By 2008 the share price of Bear Stearns had dropped from $133 to $10, the price at which the company was acquired by JPMorgan Chase. From 2006 to early 2012 Apple shares increased from $75 to over $200 per share, while HP increased from $30 to $50 per share.
(a) Discus the implication of the corporate strategy of repurchasing outstanding shares of stock.
(b) Compute and contrast the outcomes of this financial strategy among the three companies above.
(c) Discuss the various methods companies can employ to create wealth for their shareholders.