Buyback

A buyback, in corporate finance, is the process by which a company purchases its own shares from the marketplace or from current shareholders. Buybacks are typically announced through a formal program and may continue over a period of days or months. The term can also refer to consumer or business-to-business programs in which a company repurchases used products from customers, often to refurbish and resell or recycle them.

In the context of public companies, buybacks are a common method of returning capital to shareholders, alongside dividends. They can be executed through open market repurchases, tender offers, or accelerated share repurchase agreements. Open market buys occur like normal trading; tender offers specify a price and quantity; ASRs involve a bank delivering a large block of shares initially. Financing may come from cash reserves, debt, or a combination. Effects on the company include a reduction in outstanding shares, potentially increasing earnings per share and possibly the stock price. Buybacks can be used to offset dilution from employee stock options.

Critics argue that buybacks favor short-term gains, may misallocate capital, and can increase leverage. Some jurisdictions impose rules or limits on buybacks to prevent market manipulation; others require disclosure of programs and timing to maintain transparency. The efficiency of buybacks depends on market conditions and the company's growth prospects.

In addition to corporate finance, buyback programs are used by retailers and manufacturers to repurchase end-of-life products for refurbishment, recycling, or resale, often under warranty in the consumer electronics, automotive, and fashion sectors. These programs can support circular economy goals and influence resale markets.