Stock Buyback/Repurchase

Next video:
Loading the player...

A stock buyback, or repurchase, occurs when a company buys its own shares off the market and therefore reduces the amount of stock outstanding.

It can do this in one of two ways: The company can either buy shares at current market prices or tender a fixed-price offer to current shareholders.

The primary benefit of a buyback is the price appreciation investors usually see after the transaction. When the supply of stock available to the general market suddenly becomes smaller, each share is worth more.

Related Articles
  1. Fundamental Analysis

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  2. Taxes

    6 Reasons to Donate Your Car to Charity

    It's no longer a free ride, but there are still tax benefits to doing so.
  3. Economics

    What Does Vesting Mean?

    Vesting is the process of accruing non-forfeitable rights.
  4. Economics

    What's a Conglomerate?

    A conglomerate is a corporation that’s comprised of several different independent businesses.
  5. Investing Basics

    Breaking Down Optimal Capital Structure

    An optimal capital structure shows the best balance of debt to equity a company can have in order to minimize its cost of capital.
  6. Term

    What is a Preemptive Right?

    A preemptive right allows select shareholders to buy newly issued shares in their corporation before the general public.
  7. Economics

    Explaining the Balanced Scorecard

    A balanced scorecard is a metric that measures a business’ performance.
  8. Investing Basics

    What is a Public Company?

    A public company has sold stock to the public through an initial public offering (IPO) and that stock is currently traded on a public stock exchange.
  9. Economics

    What Does Human Resources Do?

    Human resources (HR) is the department within a company that handles all matters relating to employment.
  10. Professionals

    8 Justifications For Sky-high CEO Salaries

    Why are CEO salaries so astronomically high? There may be more to the story than you think.

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!