Why Companies Buy Back ?

Buyback is a term used when the company repurchases outstanding shares so that the number of shares in the market is reduced. It is also known as stock buyback or stock repurchase plan. The strategy of buyback is mainly applied when a company wants to increase the value of available shares and to assure that they are not threatened by share holders who want control over their stake. In short, if a company is looking for a self investment, then they can carry out the buyback concept. If a company holds majority of its shares, then it becomes impossible or expensive for another company to acquire it. Buyback can be carried on gradually or all at once.  Buyback can also be an attempt made by a company to increase the value per share by reducing the number of shares available in the market.  If a company feels that a certain investor is unfair to the firm and is considering a hostile takeover, then it may buyback a block of stock hold by the investor.

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Edited and Updated 31st May 2014

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