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[quote user="MichaelSol"]Another way of looking at it, from an investor's perspective. How would an investor view the impact of the stock buyback program? The company incurred debt of $2.2 billion, charges to debt and against retained earnings/equity for the years ending 1999 and 2000, and interest charges into the future (assuming ten years) of $990 million. The total cost of the Stock Repurchase program in those two years, to the Company "value," of  $3.179 billion. The Company suffered a loss in market capitalization between the $31/share the market allocated in 1999 (when 470.5 million shares were outstanding), and the $27 per share that the market allocated in April, 2001 (when 412 million shares were outstanding). The total decline in market capitalization of $3.260 billion. I am absolutely positive that, somewhere, Greyhounds took the economics class that he says will teach everyone that a $3.3 billion loss in value, a 23% decrease, represents enhanced shareholder value. However, rounding off, what is clear is that the "market" depreciated the value of the BNSF by approximately $3.3 billion during the period of time that an investor could see that the cost to the company of the stock re-purchase program would ultimately total $3.2 billion for that same two year period. Those do indeed go to the fundamentals of the company, more so than an aborted merger announcement. I simply find it hard to believe that an investor would not look at it as a reasonable investor would look at it. Greyhounds' error in his usual commentary was to assume book value. Nobody said anything about book value. Share price does not measure book, it measures market. The book value declined, but the market value declined even more -- because investors measure future "impact." Income also declined during that period -- in part of course due to higher interest charges, but only in part. Is there a rational basis for a shareholder to offer $27 per share in April, 2001, rather than the $31 she offered in 1999?  Murphy, do you consider it merely a coincidence that market cap declined by nearly the identical amount that a rational investor would assess the impact on the company of the share repurchase program, using nothing more mystical than generally accepted accounting principles? Not sure, by April of 2001, how an investor would value the impact of the CN/BNSF merger announcement of December, 1999 on her reason for offering $27 per share, nothwithstanding that there were 87 million fewer shares outstanding, which according to Greyhounds meant she should have been offering, or offered, something substantially higher than $31 per share. Reality, however, by offering no support for his contentions, plays no role in his assumptions or conclusions. I can read exactly why I would buy at $27 in April, 2001 from the Balance Sheet. I just can't find the CN/BNSF merger on that Balance Sheet prepared December 31, 2000. I do see that my shares of BNSF were worth a lot less than they were in 1999. [/quote] Okay, so BNSF went into debt to repurchase stock rather than using cash on hand to facilitate the repurchase.  Stock repurchases are usually enacted to enhance shareholder value, so obviously this bizzaar transaction did not result in the ostensibly desired result, aka it backfired.  However, it did give Exhibit A for why a company should only use debt financing for capital projects aka asset development, not for stock price manipulation. Are there any other examples of a company, any company, financing stock repurchase with new debt? Would such a transaction have occurred under a separation scenario?  Would it have occurred if BNSF was one of 30 or 40 integrated Class I's rather than one of seven?
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