Buyback

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What is a 'Buyback'

A buyback is the repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buy back shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.

BREAKING DOWN 'Buyback'

A buyback allows companies to invest in themselves. By reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns. Buybacks can be carried out in two ways:

1. Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them.

2. Companies buy back shares on the open market over an extended period of time.

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RELATED FAQS
  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. Why does executive compensation facilitate when a company buys back its stock?

    Learn about how companies use stock buybacks in order to facilitate executive compensation and why the practice is very controversial. Read Answer >>
  3. In what situations does it benefit a company to buy back outstanding shares?

    Learn about the reasons a company may choose to buy back its outstanding shares, such as reducing the cost of capital and ... Read Answer >>
  4. Why are stock buybacks so controversial?

    Understand the nature of stock buybacks and why many investors and analysts consider them to be controversial despite their ... Read Answer >>
  5. How does it affect a company's credit rating to buy back shares?

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  6. Why would a company buyback its own shares?

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