Share Buyback
A company's repurchase of its own outstanding shares, reducing shares in circulation and often increasing earnings per share.
What is Share Buyback?
A share buyback (also called a stock repurchase) occurs when a company uses its own cash to purchase shares of its outstanding stock from the open market or through a tender offer. By reducing the total number of shares outstanding, buybacks mechanically increase earnings per share (EPS) and can boost stock price. Companies buy back shares when management believes the stock is undervalued, to return excess cash to shareholders in a tax-efficient manner (capital gains are taxed lower than dividends in the U.S.), or to offset dilution from employee stock option plans. The U.S. introduced a 1% excise tax on buybacks in 2023.
Example
Apple (AAPL) has conducted the largest share buyback program in corporate history. Between FY2013 and FY2024, Apple repurchased over $700 billion worth of its own stock, dramatically reducing its share count from approximately 26 billion to under 15 billion shares.
Source: Apple Inc. 10-K FY2024