Share Repurchase
Stock repurchase (or share buyback) is the reacquisition by a company of its own stock. In some countries, including the US and the UK, a corporation can repurchase its own stock by distributing cash to existing shareholders in exchange for a fraction of the company's outstanding equity; that is, cash is exchanged for a reduction in the number of shares outstanding. The company either retires the repurchased shares or keeps them as treasury stock, available for re-issuance.
Under US corporate law there are five primary methods of stock repurchase: open market, private negotiations, repurchase 'put' rights, and two variants of self-tender repurchase: a fixed price tender offer and a Dutch auction. In the late 20th and early 21st centuries, there was a sharp rise in the volume of share repurchases in the US: US$5 billion in 1980 rose to US$349 billion in 2005.
It is relatively easy for insiders to capture insider-trading like gains through the use of "open market repurchases." Such transactions are legal and generally encouraged by regulators through safe-harbours against insider trading liability.
Read more about Share Repurchase: Purpose, External Links, Further Reading
Famous quotes containing the word share:
“The air is precious to the red man, for all things share the same breath—the beast, the tree, the man, they all share the same breath. The white man does not seem to notice the air he breathes. Like a man dying for many days, he is numb to the stench.”
—Attributed to Seattle (c. 1784–1866)