Originally Posted by sunilraman
Can you explain how this share creep occurs? I think most of us get the other points but the "dilution" stuff, I don't understand at this stage, not without spending a few hours on Google.
However, given the opportunity now, I need to make a decision fairly quickly over the next few days.
More shares are issued to pay for employee compensation plans, so the number of shares keep going up. It was at 917 million not long ago. A few years ago, it was in the mid 800 millions.
I'm not one who cares a hoot about the dilution, because it's wiped out by Apple's growth. I know that a couple of people here will again disagree with me on this, but a lot of what we read about shareholder equity and dilution is wrong. In theory, it's right, but in practice, it makes little matter—IF the company involved is either doing very well, or very poorly. That's always the way it works on the normal curve express.
So for most companies squeezed together around the top of the curve, in other words, the average company, dilution of shareholder equity could make a difference in share price, but not by much. But for the companies on the opposite ends of the curve, it works differently. If a company is doing poorly, like say, HP had been doing, then their stock may go down based on the performance of the company, but not much will change if they do stock buybacks to slow dilution resulting from a deterioration of their cash position and profits. The stock will still tank, as it did.
Apple is in the opposite position on the curve. With its increasing sales and profits, the stock will rise even if dilution occurs, and they do nothing to counteract it.
I've always felt, from seeing real world results, that stock buybacks, unless done for the purpose of employee compensation, is a complete waste of money. It's money thrown away.