Share repurchase

The examples and perspective in this article may not represent a worldwide view of the subject. You may improve this article, discuss the issue on the talk page, or create a new article, as appropriate. (October 2018) (Learn how and when to remove this template message)

Share repurchase, also known as share buyback or stock buyback, is the re-acquisition by a company of its own shares.^[1] It represents an alternate and more flexible way (relative to dividends) of returning money to shareholders.^[2] When used in coordination with increased corporate leverage, buybacks can increase share prices.^[3]

In most countries, a corporation can repurchase its own stock by distributing cash to existing shareholders in exchange for a fraction of the company's outstanding equity; that is, cash is exchanged for a reduction in the number of shares outstanding. The company either retires the repurchased shares or keeps them as treasury stock, available for re-issuance.

Under U.S. corporate law, there are six primary methods of stock repurchase: open market, private negotiations, repurchase "put" rights, two variants of self-tender repurchase (a fixed price tender offer and a Dutch auction), and accelerate repurchases.^[4] More than 95% of the buyback programs worldwide are through an open-market method,^[2] whereby the company announces the buyback program and then repurchases shares in the open market (stock exchange). In the late 20th and the early 21st century, there was a sharp rise in the volume of share repurchases in the United States: US$5 billion in 1980 rose to US$349 billion in 2005. Large share repurchases started later in Europe than in the United States, but are nowadays a common practice around the world.^[5]

U.S. Securities and Exchange Commission (SEC) rule 10b-18 sets requirements for stock repurchase in the United States.^[6]