Example: Clark Industries

• 200 million shares outstanding and no debt

• $600 million in excess cash that can be paid out to investors through a share repurchase Currently the share price is $30

• Management believes the correct share price today should be $35

• Assume there are no taxes, and no other market imperfections

Suppose that there is new information coming out soon after which investors will also value the stock at $35.

Should the management of Clark Industries repurchase shares today or should they wait and repurchase shares after the new information comes out