Share Buyback
A buyback is when a company purchase its own shares from the market.
Quick Reference:
Company buys back its shares. Reduces shares on issue. Boost earnings per share.
Expanded Explanation:
Companies somtimes use excess cash to buy back their own shares instead of paying it out as dividends. When shares are bought back, they are usually cancelled, which reduces the total number of shares on issue. This increases each remaining shareholder’s ownership percentage and can lfit earnings per share.
Buybacks are often seen as a positive signal, suggesting management thinks the stock is undervalued. However, they can also be controversial if the money could have been better used for growth or paying down debt. A buyback usually means fewer shares exist at the end of it, which can support share price. Although this effect does depend on the companies reasons and financial health.