Microsoft is sitting on US$130 billion worth of cash. But with great cash, comes great responsibility - and freedom.
Background: We all know Microsoft as the OG software company which now specialises in the cloud operator - it's worth a huge US$2 trillion.
What happened: Microsoft's shares are sitting near record levels (after soaring 38% this year alone), and the company is sitting on a sizeable stash of cash. We're talkin' US$130 billion under the bed.
What else: With great cash comes great responsibility. They could acquire new companies (oh wait, they already did), or invest in new companies (oops, did that too), or they could return more value to shareholders. And after approving a US$60 billion share buy-back, well that's just what they'll do.
💡Share buybacks are when companies re-purchase the shares that they had previously issued to others. And these buybacks often become a big present to existing shareholders.
💡It's simple supply and demand: if you reduce the supply of something, but the demand stays constant, then the price of that something is bound to go up in response.
💡Share buybacks are also a strong signal to the market. It indicates that a company is confident in its future prospects. So this buyback is a major flex by Microsoft to the rest of the market.
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