Share Buyback
A share buyback is when a company uses its cash to repurchase its own shares from the market.
Buybacks reduce the share count, which mechanically increases earnings per share and can support the share price. For shareholders who don't sell, buybacks are a tax-efficient alternative to dividends in many jurisdictions — the value is delivered through price appreciation rather than taxable income.
Critics argue that buybacks at high valuations destroy value — the company pays over the odds for its own shares when it should be investing in the business or preserving cash for downturns. Supporters counter that management knows the business better than the market does.
The SEC requires listed US companies to disclose buyback programmes, and London-listed companies must announce purchases through regulatory news.
Example
If a company with 100 million shares buys back 5 million, EPS rises by roughly 5% on unchanged earnings.
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