DEFINITION of 'Boon'
This term is often seen in the investment press in such headlines as "This Boom is a Boon to Investors." Essentially, any event or period in which investors experience robust returns could be considered to be a boon.
BREAKING DOWN 'Boon'
News of possible merger or a corporation's stock buyback plans are examples of why investors might experience a boon on their investment. Often the time to profit from the boon is short-lived as other circumstances eliminate the temporary price increase.
Mergers and Boons
In June 2015, Dish Network Corporation and T-Mobile US announced a possible merger, and the prices of both stocks increased. This potential merger also resulted in an increase in prices of stocks for cell tower stocks. Cell tower companies are responsible for transmitting cellular data. While the initial boon for cell tower stockholders, Barron's predicted more growth with the completion of the deal. By mid-July, it looked as if the Federal Communications Commission (FCC) was unlikely to approve part of the merger and stock prices dropped, ending the temporary boon.
Stock Buyback and Boons
Companies often invest in themselves by purchasing some of their outstanding shares of stock. A stock buyback benefits the corporation by reducing the chances of a hostile takeover by some of its shareholders who attempt to gain a controlling majority by buying available stock. Some companies offer a premium on top of the current market price of their stock to encourage investors to sell their stock back to the company, while others simply buy shares on the open market. The premium is one form of boon benefiting the investor, but those that keep their stock also benefit as reducing the number of shares increases the value of each one that remains in the investment portfolio.
The boon of a stock buyback can also end quickly. LPL Financial Holdings began a stock buyback totaling $250 million in the last quarter of 2015. While it offered a premium to a single large company that held some of its stock, the initial price on September 23 of the year was $40.20 and the company paid an average of $43.50 for 5.6 million shares. When the company reported fourth-quarter and year-end losses, its stocks collapsed to $16.50 per share, slightly more than half of its initial offering of $30 per share.