Share Buybacks

Extracted Attributes

• Tax Advantage

  Capital gains taxes are often lower than dividend taxes

• Alternative to

  Dividends

• Funding Sources

  Debt, cash on hand, or cash flow from operations

• Financial Impact

  Increases Earnings Per Share (EPS) and reduces share float

• Legal Safe Harbor

  Provides protection against market manipulation charges under Rule 10b-18

• Most Common Method

  Open market purchases (over 95% of global volume)

• Primary Regulatory Rule (US)

  SEC Rule 10b-18

Timeline

• The Securities Exchange Act of 1934 is enacted, forming the basis for future buyback regulations. (Source: undefined)

  1934-06-06

• The SEC adopts Rule 10b-18, providing a safe harbor for companies to conduct share repurchases without market manipulation liability. (Source: undefined)

  1982-11-17

• A sharp rise in the volume of share repurchases begins in the United States during the early 21st century. (Source: undefined)

  2000-01-01

• All-In Podcast Episode 164 discusses share buybacks at General Motors as an example of flawed corporate governance. (Source: undefined)

  2024-02-02

• Top 20 S&P 500 companies account for more than half of all share repurchases in Q2 2025, marking a highly concentrated wave of activity. (Source: undefined)

  2025-06-30

Share repurchase

Share repurchase, also known as share buyback or stock buyback, is the reacquisition by a company of its own shares. It represents an alternative way of returning money to shareholders instead of dividends. Repurchases allow stockholders to legally reduce taxes, where instead of paying tax on dividends they pay the lower taxes on the capital gains when selling the stock, whose price is now proportionally higher because of the smaller number of shares outstanding. In most countries, a corporation can repurchase its own stock by distributing cash to existing shareholders in exchange for a fraction of the company's outstanding equity; that is, cash is exchanged for a reduction in the number of shares outstanding. The company either retires the repurchased shares or keeps them as treasury stock, available for reissuance. Under U.S. corporate law, there are six primary methods of stock repurchase: open market, private negotiations, repurchase "put" rights, two variants of self-tender repurchase (a fixed price tender offer and a Dutch auction), and accelerate repurchases. More than 95% of the buyback programs worldwide are through an open-market method, whereby the company announces the buyback program and then repurchases shares in the open market (stock exchange). In the late 20th and the early 21st century, there was a sharp rise in the volume of share repurchases in the United States. Large share repurchases started later in Europe than in the United States, but are nowadays a common practice around the world. U.S. Securities and Exchange Commission (SEC) rule 10b-18 sets requirements for stock repurchase in the United States. Rule 10b-18 provides a voluntary "safe harbor" from liability for market manipulation under Sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934.

Web Search Results

• Share repurchase

  Share repurchase, also known as share buyback or stock buyback, is the reacquisition by a company of its own shares. It represents an alternative way of returning money to shareholders instead of dividends. Repurchases allow stockholders to legally reduce taxes, where instead of paying tax on dividends they pay the lower taxes on the capital gains when selling the stock, whose price is now proportionally higher because of the smaller number of shares outstanding. [...] A company may also buy back shares held by or for employees or salaried directors of the company or a related company. This type of buyback, referred to as an "employee share scheme buyback", requires an ordinary resolution. A listed company may also buy back its shares in on-market trading on the stock exchange, following the passing of an ordinary resolution if over the 10/12 limit. The stock exchange's rules apply to "on-market buybacks". A listed company may also buy unmarketable parcels of [...] 13. ^ The 10/12 limit refers to ASIC's requirement that companies buy back no more than 10% of the voting rights in the company within 12 months – "Share Buybacks", Australian Securities and Investments Commission 14. ^ Guest, Nicholas, Kothari, S. P., & Venkat, Parth (2023). "Share repurchases on trial: Large-sample evidence on share price performance, executive compensation, and corporate investment". Financial Management.

• Buyback: What It Means and Why Companies Do It

  The buyback ratio considers the buyback dollars spent over the past year, divided by its market capitalization at the beginning of the buyback period.8 The buyback ratio enables a comparison of the potential impact of repurchases across different companies. It is also a good indicator of a company’s ability to return value to its shareholders since companies that engage in regular buybacks have historically outperformed the broad market. ## Addressing Common Criticisms of Share Buybacks [...] A company may fund its buyback by taking on debt, with cash on hand, or with its cash flow from operations.7 ## Understanding Expanded Share Buyback Programs An expanded share buyback is an increase in a company’s existing share repurchase plan. An expanded share buyback accelerates a company’s share repurchase plan to achieve a faster contraction of its share float. The size of an expanded buyback affects its market impact. A big buyback often boosts the share price. [...] Because share buybacks are carried out using a firm's retained earnings, the net economic effect to investors would be the same as if those retained earnings were paid out as shareholder dividends (tax considerations aside). ## Exploring the Mechanics of the Buyback Process Buybacks are carried out in two ways:

• Why Do Companies Do Share Buybacks?

  5. Harvard Law School Forum on Corporate Governance. "Implementation of Share Buybacks and Their Impact on Corporate Governance." 6. Nasdaq. "The 3 Kings of Buybacks in 2024." [...] A share repurchase shows that the corporation believes its shares are undervalued and it's an efficient method of putting money in shareholders’ pockets.5 The share repurchase reduces the number of existing shares, making each worth a greater percentage of the corporation. The stock’s EPS increases so the price-to-earnings ratio (P/E) will decrease assuming the stock price remains the same. [...] A share repurchase is a reduction in the number of a public company's shares outstanding. It's accomplished by buying a portion of its shares on the open market. The company might buy the shares directly or offer shareholders the option of tendering their shares at a fixed price.

• The Return of Share Buybacks in Tech - Simply Wall St

  As mentioned above, the top 20 companies in the S&P500 account for over half of its buybacks . This leaves repurchase activity heavily reliant on just a handful of mega-cap (mostly technology-based) businesses. ✨ That said, there is a time and place for buybacks and, under the right circumstances, they can be a real source of value for shareholders. 🔍 How To Assess Buyback Potential Not all share buybacks are created equal. [...] Markets / Insights # 💸 The Return of Share Buybacks in Tech Richard Bowman Reviewed byMichael Paige View comments Watch in player Quote of the week: “ Every small bit helps if repurchases are made at value-accretive prices. Just as surely, when a company overpays for repurchases, the continuing shareholders lose” Warren Buffett Some of the biggest names in tech are restarting their buyback programs. [...] The top 20 S&P 500 companies now account for more than half of all share repurchases in Q2 2025 , marking one of the most concentrated waves of buyback activity in years. This resurgence reflects a shift from splashy capital spending toward rewarding shareholders directly, even as valuations remain somewhat elevated and regulatory scrutiny builds. By the end of this piece, you’ll see:

• How Stock Buybacks Work and Why They Matter

  When a company decides to buy back its own stock, it must outline how the buybacks will occur in a repurchase agreement. These agreements typically need to be approved by a company's board of directors, who authorize a maximum dollar amount or number of shares the firm may purchase. Different share buyback methods can affect the timing, cost, and transparency of repurchases. Understanding these mechanics can help investors better interpret the potential impact of stock buybacks. [...] Compare share repurchase agreements to actual buybacks. Companies can announce share repurchase agreements but lack follow-through due to financial strain, economic downturns, or other issues. It's important to track the number of shares actually repurchased, rather than stock buyback announcements. [...] A stock buyback occurs when a company repurchases its own outstanding shares, lowering the number of available shares on the market. This effectively makes current owners' shares more valuable because their shares now represent a larger piece of the company. Buybacks also boost EPS because the same amount of earnings is distributed across fewer shares, and they can impact valuation metrics like the price-to-earnings (P/E) ratio, making a stock seem more reasonably valued despite unchanged