You may have come across the term ‘share buyback’ (or share/stock repurchase) a few times before and wondered how a buyback affects your stock investment. Investors often view share buybacks as a positive move as it typically increases value for shareholders.
But what is a share buyback and how does it work?
A share buyback is a company buying back its own shares from the open market or directly from individual shareholders, thereby reducing the total number of outstanding shares in the market. Other than dividends, companies usually use share buybacks as a way of returning money to shareholders. So how does it do that and increase value for shareholders like you and me?