In your scenario, net assets are $5b (assets of $10b less liabilities of $5b), which equals owners equity of $5b.
There are 5 billion shares on issue....therefore equity (price) per share is $1.
You but back $2b worth of shares. Net assets falls to $3b (Assets $8b less liabilities of $5b), which again equals equity of $3b (Now only 3b shares at $1 a share).
What goes up are FUTURE EARNINGS PER SHARE....This is because your productive capacity (earnings)remains the same, but the earnings are now spread out over a reduced number of shares on issue.
I think you are getting mixed up between your capitalisation per share (ie shareprice) and your earnings per share. The share buy back does not instantaniously increase your capitalisation per share (shareprice), but does increase your future earnings per share.
Looks like we may have to agree to disagree on this one Ryan.
Cheers H.C.
OZL Price at posting:
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