DEFINITION of 'Expanded Share Buyback'

An increase in a company’s existing share repurchase plan. An expanded share buyback is an acceleration of a company’s share repurchase plan, and leads to a faster contraction of its share float. The market impact of an expanded share buyback depends on its magnitude. The greater the amount by which the expanded buyback exceeds the existing repurchase plan, the more positive the market reaction to it. 

BREAKING DOWN 'Expanded Share Buyback'

Although share repurchase and expanded buyback announcements are generally received enthusiastically by investors, skeptics contend that companies would be better off deploying excess cash in more efficient ways, such as investing in research and development or acquiring a rival company. Apart from reducing the number of outstanding shares, an expanded share buyback signals management’s confidence in the company’s future and is construed as a bullish sign by investors. Companies that have little leverage and sound credit ratings may occasionally raise capital at low interest rates and use the proceeds for an expanded share buyback.

For example, Company X with a $2 billion market capitalization may have announced its intention to expend $100 million in share buybacks over the next fiscal year. Six months into the fiscal year, the company may find that cash flows are likely to be substantially higher than its projections. Company X wants to return this excess cash to shareholders, and decides to expand its share buyback by $25 million – or 25% – because of the greater flexibility it has in the timing of this expanded buyback, compared with dividend payments.

Assume Company X had 100 million shares out when it commenced its buyback, with each share trading at $20. Over the course of the year, X may repurchase 4 million shares at an average price of $25 each through its regular buyback, and an additional million shares through the expanded buyback. The company’s outstanding share count would be 95 million at the end of the fiscal year, which means that the share count has decreased by 5% including the expanded buyback, rather than 4% if the buyback had not been expanded.  


  1. S&P 500 Buyback Index

    An index designed to track the performance of the 100 stocks ...
  2. Leveraged Buyback

    A repurchase of significant amount of shares through the use ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company ...
  4. Anti-Greenmail Provision

    A special clause located within a firm's corporate charter that ...
  5. Outstanding Shares

    Outstanding shares refer to a company's stock currently held ...
  6. Capitalization Change

    A modification in the issued and outstanding securities of a ...
Related Articles
  1. Investing

    Stock Buybacks: A Good Thing or Not?

    In recent years, the value of stock buybacks has come into question. We look at the pros and cons.
  2. Investing

    6 Bad Stock Buyback Scenarios

    Buying back shares can be a sensible way for companies to use extra cash. But in many cases, it's just a ploy to boost earnings.
  3. Investing

    Why Buybacks Can Be a Waste of Cash (BX, BAC)

    Learn the motivations behind share repurchase programs, including how they can mask slowing organic growth and why many companies buy their shares high and sell low.
  4. Investing

    Impact of Share Repurchases

    Share repurchases can have a significant positive impact on an investor’s portfolio and are a great way to build investor wealth over time.
  5. Investing

    Are Share Buybacks Propping Up the Market? (AAPL, MSFT)

    Companies are repurchasing their own shares at a rate not seen in nearly a decade, prompting observers to fret that demand for equities is not as strong as the past six weeks' rally would suggest.
  6. Investing

    How MasterCard Pulled Off a Buyback

    Stock buyback refers to publicly traded companies buying back their shares from shareholders. Why would they do that?
  7. Investing

    Why Buybacks Might Spell Bad News for Investors

    Buybacks have helped drive stocks higher since 2009 and have accelerated in 2016. Is this still good news for investors?
  8. Investing

    Dividend versus buyback: Which is better?

    Companies reward their shareholders by paying dividends or buying back shares. Learn which action is better for investors.
  9. Investing

    Stock Buyback/Repurchase

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

    How Banning Buybacks Would Help the Economy

    Stock buybacks are popular, but they're not helping the economy. Here's what would happen if they were banned.
  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. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. Why would a company buyback its own shares?

    Learn about share buybacks and some of the many reasons a company may choose to repurchase its own stock, including ownership ... Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center