What is a share buyback? What does it do?

Hello, share repurchase refers to the use of cash and other means by listed companies to buy back a certain amount of ** issued by the company from the market. After the completion of the repurchase, the company can cancel the repurchase. However, in the vast majority of cases, the company retains the repurchased ** as "treasury shares", which are no longer outstanding **, and do not participate in the calculation and distribution of earnings per share.

Treasury shares can be used for other purposes at a later date, such as the issuance of convertible bonds, employee benefit plans, etc., or when funding is needed**. The repurchase of listed companies is a necessary means for internationally accepted companies to implement mergers and acquisitions, optimize the governance structure, and stabilize the stock price.

The role of the repo**:

Enhance market confidence. Listed companies have important internal information such as the company's development strategy, technology research and development, financial status, and personnel situation, and there is a serious asymmetry with the information that external investors can understand. The repurchase of shares by listed companies can convey to the market that the company has certain development potential, and its value is higher than the current market value, and enhance market confidence.

Stabilize the stock price. In the macroeconomic recession, tight market funds or downturn, stock prices, the pessimism of the market is easy to cause a large number of investors to sell, so that the stock price of listed companies is exposed to the risk. Through share repurchase, the listed company can stabilize the stock price within a reasonable range, inhibit the continuation of the stock price, and facilitate the formation of a reasonable stock price of the company.

For example, in the U.S. stock market crash in October 1987, more than 600 companies announced plans to buy back shares within two weeks, with Citigroup announcing a buyback of up to $100 million**.

Optimize the capital structure. The development capital of listed companies relies on equity capital and debt capital, and the construction of a reasonable capital structure is very important to the development of listed companies, and share repurchase is one of the ways for companies to balance the ratio of equity capital and debt capital and optimize the capital structure. Through share repurchases, listed companies reduce the number of shares in circulation, reduce the proportion of equity capital, increase the proportion of long-term debt and financial leverage, and reduce the company's overall cost of capital under the condition that the debt capital remains unchanged.

Companies that use share buybacks to optimize their capital structures tend to have underutilized debt financing capacity that can meet higher debt capital with expected cash flows.

Prevent hostile takeovers. Although the company has raised capital, due to the increase in the proportion of external outstanding shares, it has also increased the risk of hostile takeovers of listed companies. Listed companies can reduce the proportion of shares held by external shareholders and increase their control over the company by buying back the company**.

For example, from the late 60s to the early 80s, in order to prevent its own enterprises from being swallowed up by foreign capital, a large number of listed companies implemented the employee stock ownership system and the management stock subscription system to encourage employees and management to hold shares. On the one hand, aligning the interests of the company with the employees motivates the employees and management, and on the other hand, it also reduces the external outstanding shares and maintains the control of the enterprise.

The main thing is the implementation of an anti-takeover, the importance of maintaining control of the company**.

Secondly, through share repurchases, adjust financial leverage and optimize capital structure.

Share repurchase refers to the repurchase of the company's shares issued or circulated by the company according to certain procedures. It is a defensive method to change the capital structure by buying back the outstanding shares of the company on a large scale. It is the repurchase of shares of the target company by the target company or its directors and supervisors.

1. Adjust financial leverage and optimize capital structure through share repurchase.

2. Through share repurchase, adjust the amount of stock price and realize the return of the value of the stock price.

3. Share repurchase is an alternative means of dividend distribution for the company.

4. Share repurchase is an important part of implementing anti-takeover and maintaining control of the company.

5. Use share repurchase to implement the employee stock ownership plan and the first option system.

6. Based on the repurchase request right of minority dissenting shareholders, repurchase the company's shares to protect the rights and interests of small and medium-sized investors.

7. Share repurchase is also often used in corporate mergers and restructuring plans for listed companies to become non-listed companies.

Share repurchase refers to the repurchase of the company's shares issued or circulated by the company according to certain procedures. The positive effect of share repurchase is to stabilize the company's stock price and maintain the company's image; improve the efficiency of the use of funds; As a **** for the implementation of equity incentive plans; The share buyback has boosted the company's share price. Article 74 of the Company Law of the People's Republic of China In any of the following circumstances, the shareholders who vote against the resolution of the shareholders' meeting may request the company to acquire their equity in accordance with a reasonable **:

1) The company has not distributed profits to shareholders for five consecutive years, and the company has made profits for five consecutive years and meets the conditions for distributing profits stipulated in this Law; (2) The merger, division, or transfer of the company's major financial assets is in an uproar; (3) The business period specified in the articles of association of the company expires or other reasons for dissolution as stipulated in the articles of association arise, and the shareholders' meeting passes a resolution to amend the articles of association to make the company exist. If the shareholder and the company cannot reach an equity acquisition agreement within 60 days from the date of the resolution of the shareholders' meeting, the shareholder may file a lawsuit with the people's court within 90 days from the date of the resolution of the shareholders' meeting.

1. The company can consider using share repurchase to reduce the company's shares and shareholders' equity, increase the income per share, so as to improve the return on net assets and greatly reduce the company's profit pressure.

2. Through share repurchase, a part of the shares can be taken out as a reward to solve the incentive problem of employees. In contrast, due to the cumbersome procedures, complex procedures and high costs of new share issuance, the better way to solve the problem of employee stock ownership plan and **** is share repurchase.

3. Share repurchase is conducive to stabilizing and maintaining the company's stock price, because if the company has a large amount of cash reserves, it is easy to become the target of acquisition, and the company's use of cash to repurchase shares can reduce this possibility; The company can directly buy back the company's shares publicly at a much higher than market price**, causing the stock price to soar and scare off other acquirers.

4. Through share repurchase, the company's earnings per share can be increased and the market value can be increased, which is conducive to safeguarding the legitimate rights and interests of public shareholders.

1. What are the circumstances under which the company buys back shares?

The Company shall not acquire the shares of the Company. However, this does not apply in any of the following circumstances:

1. Reduce the registered capital of the company;

2. Merge with other companies that hold shares of the Company;

3. Reward shares to the employees of the company;

4. The shareholder requests the company to acquire its shares because of the objection to the resolution of the general meeting of shareholders on the merger or division of the company.

2. What are the characteristics of shares?

1. The amount of shares, the capital of the shares is divided into shares, and the amount of each share is equal, that is, the shares are a reflection of a certain value and can be measured in currency;

2. Equality of shares, that is, each share of the same type should have the same rights;

3. The indivisibility of shares, that is, shares are the most basic unit of the company's capital, and each share cannot be redivided;

4. The transferability of shares, that is, the shares held by shareholders can be transferred according to law.

The directors, supervisors and senior management of the company shall report to the company the shares of the company and their changes, and the annual transfer of shares during their tenure shall not exceed 25% of the total number of shares of the company held by them; The shares of the company held by the company shall not be transferred within 1 year from the date of listing and trading of the company's **.

The reason is that the company may not develop as well as expected, and the significance of the termination of the listing lies in the company's commitment and attitude towards investors.