Re: Why is a company offering to buy back their stock higher than value?
In responding to the original post I actually forgot to answer the original question - why buy back at a higher price?
When a company decides to buy their own stock back they generally believe it's undervalued and have no better investment options with their cash. There are 2 ways to buy back stock - open market purchases or tender offer.
If a company just wants to send a postive signal to the market or buy a small amount of shares, they buy their own stock in the open market. They usually buy very small amounts per day so as not to influence the price of the stock. This is very inefficient and the company may not achieve the desired amount of share repurchase.
If a company wants to acquire large amounts of shares in a short period - it announces a tender offer and thus solicits shares directly from investors (especially large holders) and avoids the public stock markets. In order to incent large shareholders to sell, the company sets the tender price above the current market price hoping to get the opportunity to buy large amounts of shares quickly.
No textbook answer, investment banking 101.
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