Each share of stock sold in the market represents partial ownership in the issuing company. If an individual or entity buys enough of these shares, they can take what's called a controlling interest in the company. For example, if you own 1/10th of a percent of XYZ and thousands of other investors own their own small portions, none of you, on your own, can affect sweeping change within the company. But an individual who owns 51 percent would be considered to have a controlling interest and can, on his or her own, determine the way the company is run. A management buyout occurs when managers or other executives in a company purchase that controlling interest from other shareholders either to take control of the company or, in some cases, to take the company private.

In a stock buyback, the company itself repurchases issued shares of its own stock in order to reduce the number of outstanding shares. By reducing the number of outstanding shares, the company can create an increase in the market price of the stock. It can also protect itself from a hostile takeover, which occurs when an outside individual or entity buys a controlling interest against the company's wishes. Finally a stock buyback can increase the earnings per share as it's reducing the number of outstanding shares by which the net income is divided. Plans for gradual stock buybacks over a period of time are referred to as share repurchase plans. Occasionally, a stock buyback could occur because the company plans on going private meaning that it will no longer allow for public ownership of its shares.

  1. Where can I find current data on stock buyback offers?

    Learn how to find information about stock buyback offers, understand the different methods of buybacks and why some criticize ... Read Answer >>
  2. How does it affect a company's credit rating to buy back shares?

    Learn how buying back shares can negatively affect a company's credit rating if the company uses debt to finance a share ... Read Answer >>
  3. What does a buyback signify about a given company's financial health?

    Learn about stock buybacks and what they can mean about a company's financial health depending on the motivation behind their ... Read Answer >>
  4. What companies will typically exercise buybacks, and why do they do it?

    Learn about what types of businesses typically execute stock buybacks and what this maneuver can indicated about a business' ... Read Answer >>
  5. What effect do stock buybacks have on the economy?

    Learn about the effect of stock buybacks on the economy. Stock buybacks lead to rising stock prices as the supply of stock ... Read Answer >>
  6. Why would a company choose to repurchase in lieu of redeem?

    Learn the difference between a stock repurchase and a stock redemption, and find out about the reasons why a company might ... Read Answer >>
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  1. Expanded Share Buyback

    An increase in a company’s existing share repurchase plan. An ...
  2. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  3. Closely Held Stock

    A company whose common shares are owned by one individual owner ...
  4. Controlling Interest

    When one shareholder or a group acting in kind holds a high enough ...
  5. Treasury Stock (Treasury Shares)

    The portion of shares that a company keeps in their own treasury. ...
  6. Share Repurchase

    A program by which a company buys back its own shares from the ...
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