Buyback Meaning: Definition, Examples, and Translations
๐ต
buyback
[หbaษชหbรฆk ]
Definition
financial transaction
A buyback is a financial transaction in which a company purchases its own outstanding shares in order to reduce the number of shares available on the open market. This can lead to an increase in the value of remaining shares and is often viewed positively by investors. Companies typically conduct buybacks when they believe their stock is undervalued or to improve financial ratios. It can also be part of a broader strategy to return capital to shareholders.
Synonyms
repurchase, share repurchase, stock buyback.
Examples of usage
- The company announced a significant buyback program to enhance shareholder value.
- After the buyback, the price of the stocks rose noticeably.
- The CEO explained how the buyback would benefit the company's financial health.
- Investors reacted positively to the news of the stock buyback.
Translations
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Interesting Facts
Finance
- A buyback can increase the value of remaining shares, as fewer shares available can lead to higher prices.
- Many companies initiate buybacks as a way to signal confidence in their own future performance to investors.
Pop Culture
- The buyback trend has been frequently depicted in movies that revolve around corporate strategies, showcasing how businesses can reshape their identities.
- Some musicians and artists have 'buyback' arrangements in contracts for reclaiming rights to their works after a certain period.
Corporate Strategy
- Companies may use buybacks to absorb excess cash, which can be seen as a more attractive option than paying dividends.
- Strategically timed buybacks can be effective during market downturns to show support for the companyโs stock.
Environmental Impact
- Some companies engage in 'buyback' initiatives for products to recycle and reduce waste, promoting sustainability.
- Buybacks in technology can involve the return of old gadgets, encouraging recycling and reducing electronic waste.
Origin of 'buyback'
Main points about word origin
- The term 'buyback' combines 'buy,' which means to purchase, and 'back,' indicating things are returned to the original owner.
- The term became popular in corporate finance during the 1980s as companies looked for ways to return value to shareholders.
The term 'buyback' originated in the financial lexicon during the rise of public companies in the mid-20th century. It reflects a shift in corporate strategies where executives began to focus on maximizing shareholder value amid increasing competition for investor attention. Emerging in the 1980s, as companies faced pressures from shareholders for better returns, buybacks became a popular tool to signal confidence in the company's future prospects. As corporations started to prioritize stock repurchase programs, the concept gained legitimacy and became a standard practice in corporate finance. The term itself combines 'buy,' reflecting the act of purchasing, and 'back,' indicating that the company is acquiring what it has previously issued to the public. Over time, buybacks have evolved, incorporating various methods, including open market repurchases and tender offers.