Shares of Alibaba Group Holding Ltd BABA 3.83% appear to have stabilized for the moment at around $75 after dropping to a new all-time low of $71.03 following a disappointing earnings report last week. The company is hoping that an announcement of a new $4 billion buyback program will help take some pressure off of the ailing stock, but the facts show that buybacks may not be a quick fix.

Offsetting Dilution

Alibaba’s new buyback plan will help compensate for dilution from the company’s share-based compensation program. In addition to employee compensation, deals such as the recent acquisition of Suning Commerce Group also water down Alibaba’s stock.

The Suning acquisition included the issuance of $2.3 billion new Alibaba shares to Suning, which offsets more than 57 percent of the $4 billion buyback plan.

Buybacks: Blessing Or Curse?

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