Share Buyback
Share buyback, also known as share repurchase, is a corporate action in which a company buys back its own shares from the market, reducing the number of outstanding shares. This is usually done to increase the value of the remaining shares, as the company is essentially using its own cash to reduce the number of shares on the market, thus increasing the demand for the remaining shares. Share buybacks can also be used to return capital to shareholders, or to prevent a hostile takeover.
History of Share Buyback
Share buybacks have been around since the early 20th century, when companies would buy back their own shares to reduce the number of outstanding shares and increase the value of the remaining shares. The practice was popularized in the 1980s, when companies began to use share buybacks as a way to return capital to shareholders. Since then, share buybacks have become a popular way for companies to return capital to shareholders, as well as to prevent hostile takeovers.
Comparison Table
| Share Buyback | Dividend |
|---|---|
| Reduces the number of outstanding shares | Pays out a portion of the company’s profits to shareholders |
| Increases the value of the remaining shares | Does not affect the value of the remaining shares |
| Can be used to return capital to shareholders | Can be used to return capital to shareholders |
| Can be used to prevent hostile takeovers | Does not affect hostile takeovers |
Summary
Share buyback is a corporate action in which a company buys back its own shares from the market, reducing the number of outstanding shares. This is usually done to increase the value of the remaining shares, as the company is essentially using its own cash to reduce the number of shares on the market, thus increasing the demand for the remaining shares. Share buybacks can also be used to return capital to shareholders, or to prevent a hostile takeover. For more information about share buybacks, you can visit the websites of the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Investor Protection Institute.
See Also
- Dividend
- Stock Split
- Shareholder Rights
- Hostile Takeover
- Shareholder Activism
- Shareholder Value
- Shareholder Equity
- Shareholder Rights Plan
- Shareholder Proposal
- Shareholder Meeting
