Benefits, Drawbacks, and Strategic Uses
What Is a Buyback?
A buyback, also known as a share repurchase, occurs when a company purchases its own outstanding stock shares to reduce their number on the open market. This strategic move aims to enhance the value of remaining shares by decreasing supply. Companies often undertake buybacks to signal confidence in their financial stability and to counter the risk of a major shareholder gaining a controlling interest, which could lead to an unwanted takeover.
Key Takeaways
- Buyback Basics: A buyback, or share repurchase, occurs when a company buys its own shares, reducing the number of shares on the open market to boost the value of remaining shares.
- Motivations for Buybacks: Companies may initiate buybacks if they believe their…
