Definition of 'Share Repurchase'
There are two main types of share repurchases: open market repurchases and tender offers. In an open market repurchase, the company simply buys back its shares on the open market. In a tender offer, the company makes a public offer to buy back its shares at a specific price.
Share repurchases can have a number of effects on a company. They can increase the company's earnings per share, because the company's net income is divided by a smaller number of shares. They can also reduce the company's debt-to-equity ratio, because the company is using its cash to buy back its shares rather than to pay down debt.
However, share repurchases can also have some negative consequences. They can reduce the company's liquidity, because the company is using its cash to buy back its shares rather than to invest in its business. They can also increase the company's taxes, because the company will have to pay taxes on the gains it realizes from the repurchase.
Overall, share repurchases can be a positive or negative thing for a company, depending on the specific circumstances. Companies should carefully consider the potential benefits and risks of share repurchases before making a decision.
Here are some additional details about share repurchases:
* Share repurchases are often used by companies to increase their earnings per share. This is because the company's net income is divided by a smaller number of shares after the repurchase.
* Share repurchases can also be used to reduce the company's debt-to-equity ratio. This is because the company is using its cash to buy back its shares rather than to pay down debt.
* Share repurchases can have some negative consequences, such as reducing the company's liquidity and increasing its taxes.
* Companies should carefully consider the potential benefits and risks of share repurchases before making a decision.
Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.
Is this definition wrong? Let us know by posting to the forum and we will correct it.