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Share buyback
The purchase by a listed company of its own shares either in the open market or by tender offers. Companies do it for five reasons:to increase the share price - according to the normal laws of supply and demand, the entry into the market of a buyer, in this case the company itself, has a tendency to push up pricesto rationalise the capital structure - the company believes it can sustain a higher debt-equity ratioto substitute dividend payouts with share repurchases, because capital gains may be taxed at lower rate than dividend incometo prevent the dilution of earnings caused, for example, by the issue of new shares to meet the exercise of stock option grantsto deploy excess cash flow and return it to shareholdersSometimes investment markets look with favour on companies that indulge in buybacks. Sometimes it is seen as a sign that the company's directors have run out of ideas. It all depends on the circumstances of the company concerned.
Similar MatchesBuybackBuyback
The covering of a short position by purchasing a long contract, usually resulting from the short sale of a commodity. See: Short covering, stock buyback. Also used in the context of bonds. The purchase of corporate bonds by the issuing company at a discount in the open market. Also used in the context of corporate finance. When a firm elects to repurchase some of the shares trading in the market.
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