Share repurchase

A company buying back its own shares, returning cash only to holders who choose to sell. It reduces shares outstanding, which can lift earnings per share without any value being created.

Where you will meet it

Share repurchase appears in 3 learning outcomes on the CFA syllabus. A few of them:

• Set out dividends, buybacks, reverse splits as well as ordinary stock splits, and the sequence of dates for a dividend
  CFA Level I · Equity Investments

  “Companies return cash through dividends and share repurchases.”

• Explain how dividends, buybacks, new share issues and shifts in leverage can change future FCFF and FCFE
  CFA Level II · Equities

  “Dividends, share repurchases and share issues are uses or sources of equity finance, so they leave FCFF and FCFE unchanged, because both are measured before any distribution to shareholders.”

• Outline how corporate payout policies have broadly changed over time
  CFA Level II · Corporate Finance

  “Share repurchases have grown as a share of total payouts, first in the US and increasingly in Europe and other markets, because they are flexible and often more tax-efficient.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with S · Glossary