I am wondering as to why promoters / large investors non-participation in Infosys buyback is acclaimed as too positive… duh… I think its common sense for promoters to not-participate in their buyback offers owing to harsh-taxation (for large investors) on buyback…
Am I missing something… opposing views welcome…
The management believes the stock is worth more than the buyback price. Hence, investors see it as a bullish signal.
Promoter non-participation = confidence + long-term belief + alignment with shareholders’ interests. That’s why it’s acclaimed as positive.
Thanks for the add-on but what you stated is a general info. I would be surprised if promoter of any company would participate in their buyback issues… atleast not until the recent taxation on buyback is changed
The promoters don’t participate mainly because, by not participating in the buyback they are essentially increasing their shareholding percentage in the company without spending a dime.
Anytime you can buy stock for less than it’s worth, it’s advantageous to the continuing shareholders
-Warren Buffet
Buybacks typically take place when the management of the company is of the view that it’s shares are undervalued/beaten down, and this is the best time to do bargain purchase.
Ultimately, it creates value not for the shareholders who sell them, but for the ones who continue to hold on.
While these arguments are true generally, I think what the OP here is correctly trying to say is that with the new tax rules on buyback proceeds, the promoters don’t have any choice but to sit out of this one. So I’m also not sure why the market is considering this as a positive news.
Very crudely, assuming promoter’s cost of acquisition is ~0, if they sell shares in open market at around 1500, they pay ltcg at 12.5% and take home 1310 per share.
If they participate in the buyback, the entire proceeds will be considered as dividend income. So with 43% marginal tax rate for these promoters, the net take home even when selling it at 1800 will be about 1030 per share.
Well, this might not be entirely true. Infosys will be paying out 18k crores for this.
Good quote, but does not make any sense for retail investors. Nor any point in generalizing for all the companies
Retail can always sell in buyback at premium and buy it back from market.
Off course, with this tax mess, it has become useless for people in high tax bracket. But if one is in low / zero tax bracket, one should definitely participate in this buyback.
As an counter example - 2 years back TCS did a buyback at 4150, today stock is around 3000. Not sure if value was created for sellers or holders 
Yeah, that quote was never meant for the retail shareholders, its was meant for those with a controlling stake.
Since the discussion was around the promoters, by not participating in buybacks, the promoters being the continuing shareholders, stand to benefit by increasing their stake in the company without directly paying for it.
Yeah.
Taxing buybacks similar to dividends, at slab rates, certainly disincentivizes anyone (especially HNIs/promoters) falling in the higher tax bracket or any tax rate higher than the capital gains tax rate for that matter.
The current taxation on buybacks is probably the major reason for promoters to not participate in them.
The first positive is the presumed valuation, i.e., by not participating, the promoters are signalling that the shares are undervalued even at the buyback price.
But, as discussed in this thread, the main reason for their non participation could very well be the tax treatment of buyback, rather than it’s valuation.
The other positive aspect could be the fact that anyone buying at current price levels can sell them at buyback price, locking in a guaranteed gain, provided they are bought before the record date and their tender to sell gets accepted.
(Correct me if I’m wrong here i.e.,on locking in the gains) sounds logically easy, but for some reason don’t think it is that easy, as the acceptance of tender doesn’t seem to be guaranteed, as it is restricted to the number of shares available for buyback.
My point was, even If the tax rules around buybacks were favorable, this 
could be a reason for promoters’ non participation. (especially when they feel it is undervalued at current buyback price)
The promoters may hold onto their shares, deferring the income tax for years or decades. This is not merely a matter of timing but rather allows them to generate even more income over time. As their shares appreciate, their wealth and purchasing power rises. Even worse, shareholders may take loans against their assets, allowing them to effectively spend their income without technically “realizing” it and paying income taxes on it.