I got a Ali Baba Share Buyback option at USD$225. I'm puzzled how come they don't buy direct from the market as their share price is only USD$150+

Thanks a lot @Chris and @Jared! I almost got scammed! Luckily, i decided to ask around before making any action.

Edit: In response to Chris, I think OP should definitely do more DD into this and look into the mechanics and terms of this buyback before committing!!

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After some research...

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Buybacks usually happen AT THE MARKET, meaning they pay market prices for it.

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It is uncommon for firms to buy at above market prices. Unless there's a call option attached to it (never heard of it before in stocks, only bonds) and even if it was available , would not be available to common shareholders or as a characteristic of the common share.

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Did a reply behind the mechanics of a share buyback a while back (though the case is a little bit different because alibaba does not pay dividends) , feel free to check it out:

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https://seedly.sg/posts/hong-kong-land-h78-buy-...

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So companies tend to buy back their shares when they feel their shares are undervalued or as a way for stakeholders to gain more control of their company.

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Also, they can buyback shares to support the price of their stock (if done via public markets) , though that's the least desirable outcome.

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But i think they're just buying it back because:

1) they're trying to support their stock price because from peak price till date its shareholders equity value has been halved. And:

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Assets = Liabilities + Equity

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Assuming liabilities stay constant, and shareholder equity is decreasing, Assets will decrease. And asset value plays into a lot of things such as credit worthiness, so management will want to make sure that Assets don't decrease so they can do a share buyback to support the price of the stock

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https://www.alizila.com/alibaba-boosts-share-bu....