Buyback

AAA

DEFINITION of 'Buyback'

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Short Covering

    Buying back borrowed securities in order to close an open short ...
  2. Outstanding Shares

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

    A reduction in the ownership percentage of a share of stock caused ...
  4. Share Repurchase

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

    A legal clause or condition contained within a contract that ...
  6. Regulation SHO

    A regulation implemented on January 3, 2005 that seeks to update ...
Related Articles
  1. A Breakdown Of Stock Buybacks
    Investing

    A Breakdown Of Stock Buybacks

  2. The
    Options & Futures

    The "True" Cost Of Stock Options

  3. How Buybacks Warp The Price-To-Book ...
    Markets

    How Buybacks Warp The Price-To-Book ...

  4. How can I sell private company stock?
    Investing

    How can I sell private company stock?

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center