Share Repurchase
A company buying back its own shares from the open market, reducing the number of shares outstanding.
What is Share Repurchase?
A share repurchase (also called a stock buyback) occurs when a company buys its own outstanding shares from existing shareholders on the open market or through tender offers. By reducing the total number of shares outstanding, repurchases increase each remaining share's claim on the company's earnings, often boosting earnings per share (EPS) and return on equity without any change in underlying business performance. Companies typically repurchase shares when management believes the stock is undervalued, when they have excess cash and limited reinvestment opportunities, or as a tax-efficient alternative to dividends (capital gains tax vs. dividend tax). The S&P 500 Buyback Index tracks companies with the highest buyback yields.
Example
Apple spent approximately $90 billion on share repurchases in its fiscal year 2023 — one of the largest buyback programs in corporate history. Apple's share count has declined from approximately 26 billion in 2012 to under 16 billion by 2024. This reduction mechanically boosted EPS even in years when net income grew modestly, benefiting remaining shareholders through per-share value accretion.