A company using its own cash to repurchase its own shares from the market.
A stock buyback is when a company uses its own cash to repurchase its own shares from the open market, reducing the total number of shares outstanding. With fewer shares splitting the same profit, each remaining share represents a slightly bigger slice of the company, which tends to push earnings per share up even if the underlying business hasn't changed at all. Supporters see it as an efficient way to return cash to shareholders; critics argue companies sometimes prioritize buybacks over investing in growth, wages, or research.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.