Business and Personal Finance Dictionary

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• BUYBACK
  
  When a company purchases shares of its own publicly traded stock or its own bonds in the open market, it's called a buyback. The most common reason a company buys back its stock is to make the stock more attractive to investors by increasing its earnings per share. While the actual earnings stay the same, the earnings per share increase because the number of shares has been reduced. Companies may also buy back shares to pay for acquisitions that are financed with stock swaps, to make stocks available for employee stock option plans, to decrease the risk of a hostile takeover by reducing the number of shares available for sale, or to discourage short-term trading in its stock by driving the price of the outstanding shares upward. Companies may buy back bonds when they are selling at discount, which is typically the result of rising interest rates. By paying less than par in the open market, the company is able to reduce the cost of redeeming the bonds when they come due.
  
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