Buy-back

A buy-back, also known as a repurchase agreement or stock buyback, is a financial transaction where a company purchases its own outstanding shares from the open market or directly from shareholders. This action reduces the number of shares available, potentially increasing the earnings per share (EPS) and stock price, and can be a way to return capital to investors. Buy-backs are often employed when a company believes its shares are undervalued, has excess cash, or wants to signal confidence in its future prospects. The transaction can be done through open market purchases, tender offers, or private negotiations.

Buy-back meaning with examples

• The company initiated a substantial buy-back program to bolster investor confidence, announcing plans to repurchase up to $500 million of its shares. This strategic move aimed to increase shareholder value amidst fluctuating market conditions and address concerns about recent earnings.
• After a period of rapid expansion, the firm used its surplus cash to execute a buy-back. Management believed the shares were undervalued compared to their projected intrinsic worth. The reduction in outstanding shares boosted key financial ratios.
• Following a successful acquisition, the corporation announced a strategic buy-back. This plan included repurchase of shares. This proactive step aimed to optimise the company's capital structure and enhance returns for its shareholders, signalling confidence.
• Facing increased market volatility, the firm considered a buy-back as part of its financial strategy. The board examined the potential benefits, like increased EPS, before determining the best approach. Options included open market and other repurchase alternatives.
• With strong cash reserves, the retailer launched a buy-back program. This involved offering a premium above the current share price. It aimed to create an immediate benefit for long-term investors and communicate the strength of its financial standing.