Many investors are aware of the benefits that buybacks can provide to shareholders. As companies reduce their outstanding shares, each remaining share accounts for a higher percentage of the firm’s value, helping to buoy prices.
Share issuance is the opposite of buybacks. As companies issue more shares, they receive cash in return, but also dilute existing shareholders. Because of dilution concerns, share issuance should be monitored, but it is certainly not always a bad thing. If cash received is invested in growth initiatives, the long-term payoff can outweigh the dilution. Coherent (NYSE: COHR), AST SpaceMobile (NASDAQ: ASTS), and Welltower (NYSE: WELL) are three companies taking this approach, issuing large amounts of stock to chase opportunities.
