EXPLAINED - Share Buyback: What does it mean and why do companies do it? What are the types of buyback?
Share Buyback: Companies may repurchase or buy back shares for a number of reasons.
Share Buyback: A share buyback is a corporate action wherein the company buys its own shares back from its investors. A company buys its shares at a higher price than the current market price. This premium is the profit that a shareholder gets.
Share Buyback: Why do companies do it?
Companies may repurchase or buy back shares for a number of reasons. A few are:
-The company aims to reduce the total outstanding shares in the market.
-Buyback increases the value of remaining shares by reducing the supply.
-Buyback prevents shareholders from taking a controlling stake.
-A share buyback programme indicates that a company has sufficient cash set aside for emergencies.
Share buyback Types
There can be two types of Share buyback. These are tender offers and open market offers.
Tender offer- A tender offer is an offer to purchase some or all of the shareholders' shares. Here, shareholders will have the option to submit or tender a portion or all of their shares within a certain time frame and at a pre-announced price. The buyback period and amount are announced by the company.
Open market offer- Under the Open Market route, the company purchases its shares directly from the market. In another word, a company buys back its shares from sellers on the exchanges. Here as well, the company decides the buyback time frame and amount. Since a large number of shares are purchased back, the buyback of shares continues for a long period so that there is no impact on the stock's price due to the buying activity.
For instance, Orbit Exports Limited announced a share buyback and serves the record date today, November 18.
Buy Back up to 4,08,163 fully paid-up equity shares of the company of face value of Rs.10 per share each at a price of Rs. 245 per share was announced earlier by the company in an exchange filing on NSE.
Click Here For Latest Updates On Stock Market | Zee Business Live
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
SRH vs GT IPL 2024 Ticket Booking Online: Where and how to buy SRH vs GT tickets online - Check IPL Match 66 ticket price, other details
Top 7 SWP Mutual Funds: Rs 50 lakh investment, Rs 70K monthly pension for 10 years, and Rs 42.30 lakh balance value; know more details
Gold and Silver rate today (May 13, 2024): Precious metal under pressure; yellow metal near Rs 72,400, white metal above Rs 84,600
SIP Returns: How Rs 3,000, 5,000, and Rs 10,000 SIPs can help you build retirement corpus of Rs 1.06 cr, Rs 1.77 cr, and Rs 3.53 cr
02:59 PM IST