Buyback

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Related to buy-back: share repurchase plan

Buyback

The covering of a short position by purchasing a long contract, usually resulting from the short sale of a commodity. See: Short covering, stock buyback. Also used in the context of bonds. The purchase of corporate bonds by the issuing company at a discount in the open market. Also used in the context of corporate finance. When a firm elects to repurchase some of the shares trading in the market.

Buyback

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.

buyback

A company's repurchase of a portion of its own outstanding shares. The purpose of a buyback may be to acquire a block of stock from an investor who is unfriendly to the target firm's management and is considering taking over the firm. Conversely, a buyback may be an attempt to increase earnings per share by reducing the number of outstanding shares. Regardless of the purpose of a buyback, the result is increased risk for the firm because of reduced equity in the firm's capital structure. Also called stock buyback, stock repurchase plan. See also greenmail, partial redemption, self-tender.
Case Study Corporate stock buybacks generally consist of a company purchasing its shares in the open market or offering shareholders an above-market price for a certain proportion of their holdings. Either method will result in fewer outstanding shares and, hopefully, help support the market price of the firm's stock. In some instances companies sell short put options that commit the companies to buy back shares of their stock at a specified price until a certain date. Companies issuing the puts pocket premiums paid by investors who gain the right to force the company to buy back its own shares. If the stock price remains above the exercise price specified by the puts, option holders choose not to exercise the puts because they have no interest in selling stock at a below-market price. The unexercised options expire, allowing the companies to issue additional puts and pocket additional premiums. In the event puts are exercised, companies purchase shares they intended to purchase in any case. A problem develops when the company's stock price declines dramatically, in which case the company will be forced to repurchase its own shares at a price much higher than the market price. This is exactly what happened to PC maker Dell Computer during the first half of 2001, when the company was forced to repurchase some of its shares for $47 (the exercise price of the puts) at a time the stock was trading on the Nasdaq National Market in the mid-20s. In other words, Dell was being required to pay twice the market price to repurchase its shares because the company had earlier sold put options with strike prices that on the issue date seemed reasonable but later turned out to be substantially higher than the price at which the stock traded in a depressed market. According to an SEC filing, Dell had issued put contracts on 96 million of its own shares at an average exercise price of $44 per share. Unfortunately for Dell, the purchases of its stock at inflated prices came at a time when the firm's cash flow was being squeezed by a weak PC market.

Buyback.

When a company purchases shares of its own publicly traded stock or its own bonds in the open market, it's called a buyback.

The most common reason a company buys back its stock is to make the stock more attractive to investors by increasing its earnings per share. While the actual earnings stay the same, the earnings per share increase because the number of shares has been reduced.

Companies may also buy back shares to pay for acquisitions that are financed with stock swaps or to make stocks available for employee stock option plans.

They may also want to decrease the risk of a hostile takeover by reducing the number of shares for sale, or to discourage short-term trading by driving up the share price.

Companies may buy back bonds when they are selling at discount, which is typically the result of rising interest rates. By paying less than par in the open market, the company is able to reduce the cost of redeeming the bonds when they come due.

buyback

see COUNTERTRADE.
References in periodicals archive ?
The share buy-back programme will start on 19 August 2019 and will run up to 5 August 2020.
Form and purpose of buying back treasury shares, in particular whether the buy-back is to be conducted through and/or outside the stock exchange, whether a takeover bid will be made during the buy-back, whether the shares are to be retired or sold again if need be, or whether they are to be used for the purposes of an employee participation program: The buy-back of ANDRITZ shares under the buy-back program will be conducted through the Vienna Stock Exchange.
While, AHL's Board of Directors has approved a proposal to buy-back its own fully paid-up ordinary shares of face value of Rs.10 from shareholders of the company at a price of Rs.
This share buy-back programme is initiated under the authorisation granted at the annual general meeting on 24 April 2019, according to which the company may purchase up to 10% of the company's share capital for the time being.
This buy-back programme will be managed by an investment firm or credit institution that makes its trading decisions regarding the timing of the buy-backs of Telia Company's shares independently of Telia Company.
Between 2008 and 2017, 466 of the S&P 500 companies spent around $4 trillion on stock buy-backs, equal to 53 per cent of profits.
The Lopez firm, in a disclosure to the Philippine Stock Exchange (PSE), has noted that "the maximum amount of shares and buy-back period will be subject to revision by (its) board of directors from time to time as circumstances warrant," and subject to proper disclosures to regulatory agencies.
'The buy-back program shall be implemented in an orderly manner and should not adversely affect the company's and its subsidiaries' prospective and existing projects,' the company assured.
As per auction calendar determined by the Finance Division, the buy-back programme will be operational through reverse auction or over the counter (OTC) transaction, the circular says.
The regulations shall be applicable to buy-back of own shares by listed companies, said a press statement issued by the commission here.
Waha Capital has announced its intention to implement a share buy-back programme for up to 10 per cent of the outstanding shares of the company, allowing for the repurchase of up to 194 million of the company's shares from the market.
"Legal and contract experts of NIOC have managed over the past two decades to work out the so-called buy-back model based on the country's economic conditions and by benefiting from domestic and foreign experiences.