Biotech Values

[DewDiligence]

>PFE – I wouldn't buy the stock so the only reason the company would do that is to support the stock price but that is a bad reason.<

? Why would PFE’s actions, or lack thereof, depend on whether you would buy the stock?

PFE’s motive for buying its own stock would not be to support the short-term share price, but rather to increase the underlying value per share by decreasing the number of shares outstanding.

PFE has $26B in cash, although some of this is in foreign subsidiaries. If they hypothetically used all of this cash to buy back shares at the current share price, it would decrease the number of shares outstanding by 25%. This would boost EPS to a larger degree than any other action including an acquisition or licensing of a blockbuster drug.