DEFINITION of buyback in Finance

A buyback is a corporate action undertaken by a firm where it repurchases some of its shares outstanding from the market. This is done for one of 3 reasons:

• Increase the value of the shares (less supply, same demand = higher price).
• Invest in themselves; owning more shares in the company allows them to experience a higher percentage of the profits.
• Reduce the threat of any takeover by reducing the percentage of the company which is up for sale on the markets.