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The act of a publicly-traded company buying its own stock, sometimes at a price well above fair market value. Buyback is not intended to stop trade on its stock. Rather, it is an attempt either to reduce the supply of shares in the market (with the hope of driving up the share price) or to prevent a real or suspected hostile takeover. If a company becomes its own majority or plurality shareholder, it either makes a hostile takeover impossible or more expensive for the acquiring company. A buyback may occur all at once or gradually over time. See also: Antitakeover measure, Self-tender offer.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
To repurchase an asset or security. For example, a company may decide to buy back shares of its own stock from an investor in order to reduce the possibility of a takeover.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.