A strategy to pay out profits to the shareholders by buying back outstanding shares

A buyback is a corporate action undertaken by a firm where it repurchases some of its shares outstanding from the market. This is done for one of 3 reasons:

  • Increase the value of the shares (less supply, same demand = higher price).
  • Invest in themselves; owning more shares in the company allows them to experience a higher percentage of the profits.
  • Reduce the threat of any takeover by reducing the percentage of the company which is up for sale on the markets.
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