Glossary
Definition
Share Buyback
When a company repurchases its own shares from the open market.
A share buyback (or stock repurchase) occurs when a company uses its cash to buy back its own shares from the market, reducing the total number of outstanding shares. This increases earnings per share (since the same profits are spread across fewer shares) and can boost the stock price. Buybacks are often preferred over dividends for tax efficiency.
Frequently Asked Questions
Are buybacks good for shareholders?
Generally yes — buybacks increase the value of remaining shares by reducing dilution. However, if a company buys back stock at an inflated price, it destroys value. Warren Buffett has written extensively on buying back stock only when it trades below intrinsic value.