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Share buyback
BörseErwachsene
A company buys back its own shares on the stock exchange. This reduces the number of shares and increases earnings per share. An alternative to dividends – often more tax-efficient.
In a share buyback (Aktienrückkauf), a company buys its own shares on the stock exchange and cancels them. There are then fewer shares in circulation – each remaining share is worth more.
Why do companies do this?
• Earnings per share rise: same profit ÷ fewer shares = higher profit per share
• More tax-efficient than a dividend: capital gains are only taxed when sold
• Signal: "We believe our share is undervalued"
Largest buyback programmes: since 2012 Apple has spent over 600 billion dollars on share buybacks – more than the GDP of most countries.
Did you know? Apple buys back its own shares so aggressively that the total number of Apple shares has fallen by more than 40% since 2012. So anyone holding Apple shares automatically owns an ever larger stake.
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