What Are Share Repurchases?

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Share repurchases, also known as share buybacks or stock buybacks, are a way for companies, here are some things to know.

1

Buying Back Shares

A share repurchase involves a publicly traded company buying back its shares from the market.

2

Alternative to Dividends

Share repurchases act as an alternative method, alongside dividends, for companies to distribute cash to shareholders.

3

Signaling Confidence

Repurchases often indicate management's belief that the stock is undervalued and the company has strong prospects.

4

Boosting Share Price

By reducing the number of outstanding shares, repurchases can potentially increase the price per share.

5

Financial Metrics

Buybacks can improve certain financial ratios, such as earnings per share, which can be attractive to investors.

6

Strategic Uses

Companies may use repurchases to stop a declining stock price, increase their ownership stake, or for other strategic reasons.

7

Tax Considerations

Share repurchases can be tax-efficient for some investors compared to dividends.