A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available on the open market. This is done by distributing cash to existing shareholders in exchange for a fraction of the companys outstanding equity, which reduces the number of shares outstanding. The company either retires the repurchased shares or keeps them as treasury stock, available for re-issuance.

A share buyback can demonstrate to investors that the business has sufficient cash set aside for emergencies and a low probability of economic troubles. Companies buy back their shares to reduce the dilution of existing shareholders, to provide investors with a return, and to increase the proportion of shares owned by investors. A company may feel its shares are undervalued and do a buyback to provide investors with a return.

There are six primary methods of stock repurchase under U.S. corporate law: 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) .

Under regular market conditions, share buybacks can have benefits such as generating additional shareholder value and increasing the proportion of profits owned by shareholders. However, buybacks can also backfire for a company competing in a high-growth industry because they may be read as an admission that the company has few important new opportunities on which to otherwise spend its money.

In summary, a buyback is when a company buys its own outstanding shares to reduce the number of shares available on the open market. Companies buy back their shares to reduce the dilution of existing shareholders, to provide investors with a return, and to increase the proportion of shares owned by investors. There are six primary methods of stock repurchase under U.S. corporate law, and more than 95% of the buyback programs worldwide are through an open-market method.