Financial Engineering

Large amounts of money are shifted for this purpose - always by legal means, but using dubious methods: the share price can be "manipulated" upwards.

The recipe for this sounds almost like "simple finance". The company takes out a large loan - in other words, takes on a little debt. It uses this capital to launch a share buyback program.

You somehow buy yourself in the form of a backward loop, but that's another story. This money transfer "credit becomes shares in your own company" reduces the number of shares on the stock exchange.

What remains to be hoped for: The value of the company remains the same, but because there are now fewer shares on the market, the remaining shares are naturally worth more.

This beautiful and legal transfer of money from corporate debt to a higher share price has a name: Financial Engineering.

Based on technical knowledge and specifications, a machine is constructed that controls money flows. Or, as can be read on Wikipedia:

"Financial engineering is a multidisciplinary field that encompasses financial theory, engineering methods, mathematical tools and the practice of programming."

CFOs have mastered the paradox of turning a debt-ridden company into a more valuable one on the stock market. In the SAP press release, it sounds like this:

"Taking into account the positive financial development and a very solid balance sheet structure, the Supervisory Board of SAP SE has approved an increased capital distribution in 2020 as proposed by the Executive Board.

Under this new program, the company is authorized to carry out share buybacks and/or pay a special dividend totaling €1.5 billion until December 31, 2020."

The Chief Financial Officer of SAP, Luka Mucic, says:

"In addition to an attractive regular dividend, share buy-backs and special dividends are important instruments for increasing the value of the company and sharing the success of our shareholders."

He does not mention that the former industrial giant and Siemens competitor General Electric almost slipped into bankruptcy due to "financial engineering".