Question

Apple Incorporated (AI) board of directors has indicated   that they will repurchase AI’s stock effective July 1st 2020. You currently hold 100 AI’s stock. Explain in detail, the concept of “information content” to be derived from the board of director’s pronouncement. Discuss the likely impact of this pronouncement to AI’s stock price? In respect of this announcement, discuss the concept of the “signaling theory” and how will managers of AI be placed in an advantageous position ahead of the normal investor? (Word count limit (250-500)

Answer 1

Answer:

When there would be a sign by the top managerial staff or board of directors for the acquisition of this stock, at that point dynamic and active investors will be attempting to follow yp on such news and they will be attempting to discount this news into the general share price of the organization by getting tied up with the share since they will be attempting to interpret the signs of the governing body in light of the fact that those are the appropriate authority concerned about repurchase of the shares.

Data content would advocate that such data will be immediately discounted into the cost/price of the share since they are dependable informations and they are approved by the suitable relationship of people so it would prone to affect the cost/price of the share.

The share cost would respond the updates on repurchase of share by demonstrating an increase on the grounds that normally repurchase is done at a higher cost than normal of the current market value and the share will be attempting to discount that.

Signalling hypothesis is centering about additionally the proper signs from the governing body or Board of Directors which will be prompting to an appropriation by the partners of the organization that share will be repurchased so representatives of the organization will by and large be insiders to that informations and they will be attempting to buy this share ahead of time so as to pick up from the share buyback and the ordinary investors are not the insiders so they won't approach the earlier data.