what is buy back of shares ? write it's advantages and disadvantage
Answers
Answer:
hope mark me down as a brainlist
Explanation:
HomeDividend DecisionsShare Buyback- Methods, Advantages and Disadvantages
Share buyback, also known as share repurchase, is an action to buy back the shares from the shareholders. There are two parties involved in this transaction: 1) Company and 2) Shareholders. The company buys back the shares from interested shareholders by offering them cash. There are many methods through which this transaction can happen. Also, there are certain advantages and disadvantages of this process. We will discuss them here.
Table of Contents
1 METHODS OF SHARE BUYBACK
1.1 Buying From Open Market
1.2 Fixed Price Tender Offer
1.3 Dutch Auction Tender Offer
1.4 Repurchase by Direct Negotiation
2 ADVANTAGES OF SHARE BUYBACK
2.1 Flexibility
2.2 Tax Benefit
2.3 Share Buyback as a Signal
3 DISADVANTAGES OF SHARE BUYBACK
3.1 Unrealistic Picture through Ratios
3.2 Judgment Error in Valuation
METHODS OF SHARE BUYBACK
BUYING FROM OPEN MARKET
In this method of share buyback, the company buys its own stocks from the market. This transaction happens through company’s brokers. This repurchase program happens for an extended period of time as a large block of shares needs to be bought. The company is under no obligation to conduct the repurchase program after the announcement. The company has the option to cancel it. Also, it can make changes in the repurchase program according to company’s situations and needs. If this method is effectively implemented, it can prove to be very cost effective.
FIXED PRICE TENDER OFFER
In this method, the company makes an offer to buy a fixed no. of share at a fixed price to its shareholders. The price offered by the company is above the current market price. The shareholders have the option to sell back the share or hold the shares. Interested shareholders submit the no. of shares they are willing to sell back to the company. If total no. of shares exceeds the shares required by the company, shares are bought back on a pro-rata basis. This method can be conducted quickly but it can be costlier than buying shares back from the open market.Share buyback - Methods, Advantages and Disadvantages
Share buyback, also known as share repurchase, is an action to buy back the shares from the shareholders. There are two parties involved in this transaction: 1) Company and 2) Shareholders. The company buys back the shares from interested shareholders by offering them cash. There are many methods through which this transaction can happen. Also, there are certain advantages and disadvantages of this process. We will discuss them here.
Table of Contents
1 METHODS OF SHARE BUYBACK
1.1 Buying From Open Market
1.2 Fixed Price Tender Offer
1.3 Dutch Auction Tender Offer
1.4 Repurchase by Direct Negotiation
2 ADVANTAGES OF SHARE BUYBACK
2.1 Flexibility
2.2 Tax Benefit
2.3 Share Buyback as a Signal
3 DISADVANTAGES OF SHARE BUYBACK
3.1 Unrealistic Picture through Ratios
3.2 Judgment Error in Valuation
METHODS OF SHARE BUYBACK
BUYING FROM OPEN MARKET
In this method of share buyback, the company buys its own stocks from the market. This transaction happens through company’s brokers. This repurchase program happens for an extended period of time as a large block of shares needs to be bought. The company is under no obligation to conduct the repurchase program after the announcement. The company has the option to cancel it. Also, it can make changes in the repurchase program according to company’s situations and needs. If this method is effectively implemented, it can prove to be very cost effective.