Sometimes, shares of stock offered by a company are not regular, market-driven common shares. Instead, they may be preferred shares, which are considered fixed income securities and are issued with a par value. When that par value is paid back to the purchaser of the preferred share, this is considered a redemption. Redemption can also occur when issued bonds are called or matured and the principal, or par value, is paid back.
When a company issues shares of common stock for the public to buy and later decides to buy some of those shares back, that's considered a repurchase rather than a redemption. The major difference between the two is that the shares bought back in a redemption are considered a fixed-income security that is expected to be bought back by the issuer. A repurchase of shares, however, reduces the number of outstanding shares that a company has, and can increase the company's holdings so that it remains or regains majority shareholder status. It can also increase the stock's earnings per share, since it reduces the outstanding number of shares. A repurchase may even allow the company to profit off of the resale of its own shares at a later time.

  1. Why should a company buy back shares it feels are undervalued instead of redeeming ...

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  2. Why would a stock have no par value?

    People often get confused when they read about the "par value" for a stock. One reason for this is that the term has slightly ... Read Answer >>
  3. What is the difference between par value and market value?

    Learn about the difference between the par value and market value of financial securities, including the role they play in ... Read Answer >>
  4. Are corporations required to state the par value of their stock?

    Find out when companies are required to state the par value of stock and why it is beneficial to businesses and shareholders ... Read Answer >>
  5. What is the difference between par value and face value?

    Learn about the par value and face value of financial securities and what these synonymous terms mean about the value and ... Read Answer >>
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  1. Full Stock

    A stock with a par value of $100 per share. A full stock issue ...
  2. Share Repurchase

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

    Stock sold with a par value half of what is considered standard. ...
  4. Redemption

    The return of an investor's principal in a fixed income security, ...
  5. Par

    Short for "par value," par can refer to bonds, preferred stock, ...
  6. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
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