What is a stock buyback?

A stock buyback occurs when a company purchases its own stock, either on the open market or directly from its shareholders. It's also known as a "share buyback" or "stock repurchase". When a company buys back stock, it absorbs or retires these repurchased shares and re-names them treasury stock.

When should a company buy back shares?

A company will buy back shares when it has plenty of cash or during a period of financial health for the company and the stock market. The stock price of a company is likely to be high at such times, and the price might drop after a buyback. A drop in the stock price can imply that the company is not so healthy after all.

What is a share repurchase or buyback?

A share repurchase or buyback is a decision by a company to buy back its own shares from the marketplace. A company might buy back its shares to boost the value of the stock and to improve the financial statements. Companies tend to repurchase shares when they have cash on hand and the stock market is on an upswing.