{"id":45293,"date":"2023-06-21T11:55:46","date_gmt":"2023-06-21T09:55:46","guid":{"rendered":"https:\/\/staging.captrader.com\/glossar\/aktienrueckkauf\/"},"modified":"2023-06-21T11:55:46","modified_gmt":"2023-06-21T09:55:46","slug":"stock-buyback","status":"publish","type":"glossar","link":"https:\/\/www.captrader.com\/en\/glossar\/aktienrueckkauf\/","title":{"rendered":"Share buyback"},"content":{"rendered":"

Investors can acquire shares in a company through shares. Conversely, under certain conditions, companies have the option of selling these shares back. Companies can buy back shares for various reasons. Find out here why a share buyback can make sense and what it means for the price of a security.\u00a0<\/p>\n\n\n\n

How does a share buyback work?<\/h2>\n\n\n\n

In a share buyback, a company acquires securities of its own share capital. It can use regular stock exchange trading or a tender procedure for this. The latter is a special offer to sell that is submitted directly to the shareholders. <\/p>\n\n\n\n

In the case of a buyback via stock exchange trading, the company acquires its own shares in the same way as a private investor would, for example. As such a purchase could increase demand and therefore the price of the securities, a share buyback is usually only scheduled for a limited period of time. <\/p>\n\n\n\n

When an investor buys shares in a company, he or she also acquires voting rights and the right to vote. Right to a possible dividend payment<\/a>. This is not the case with a share buyback. The securities that are transferred to company ownership lose their voting and dividend rights. Shares that remain in circulation benefit from such a buyback: their voting and dividend rights increase accordingly.\u00a0<\/p>\n\n\n\n

Reasons for the share buyback<\/h2>\n\n\n\n

Buying back their own securities has numerous advantages for companies. Such a process can therefore serve various strategic objectives. For example, shares can be bought back in order to issue them to the company's own employees. <\/p>\n\n\n\n

This is often done as a reward and to motivate employees. Selling at a reduced price within the company is also a frequently used method. Employees who are also shareholders in the company identify more strongly with their employer and are often more committed than average to its success. <\/p>\n\n\n\n

A share buyback can also reduce the risk of hostile takeovers, as they lead to a concentration of securities among fewer shareholders. This can generally make it more difficult to take over the majority of shares and thus control of the company. <\/p>\n\n\n\n

Conversely, the repurchased shares can also be used to acquire another company. When acquiring another company, the necessary amount can be partially paid for with the company's own securities. Such a \"stock swap\" allows the takeover to take place even if a company does not have sufficient cash. <\/p>\n\n\n\n

However, a share buyback could also serve to maintain the shareholder structure or the share price. Such a process is always an important signal to investors and the markets. The company can use it to positively influence the share price performance or reduce the number of small shareholders. <\/p>\n\n\n\n

Sometimes, however, a buyback is simply carried out because a company cannot currently find a better use for its capital. If no sensible investments are possible, it does not make economic sense to leave the money in the company. Distribution via dividend payments is a possible alternative, but this can have disadvantages from a tax perspective. Share buybacks could lead to deferral effects and therefore be more lucrative for investors. <\/p>\n\n\n\n

How is a share buyback financed?<\/h2>\n\n\n\n

The repurchase of shares via the stock exchange or a direct offer must of course be paid for. A company can use free equity capital for this, which has been generated through profits, for example. <\/p>\n\n\n\n

The use of borrowed capital is also an option: a share buyback can reduce the dividend payout and therefore lead to savings for the company. If these savings are greater than the interest rate due on the loan required for this, debt financing can be worthwhile. <\/p>\n\n\n\n

How a share buyback works<\/h2>\n\n\n\n

In Germany, share buybacks must be approved by the Annual General Meeting. According to Section 71 of the German Stock Corporation Act, up to 10 percent of the share capital can then be bought back. This process may take a maximum of five years. <\/p>\n\n\n\n

The share capital is the assets that were contributed when the company was founded. This amount is usually increased in the course of the company's activities through capital increases. <\/p>\n\n\n\n

In order to protect themselves, many German companies have such an authorization printed on every Annual General Meeting<\/a> issue. However, it does not necessarily have to be executed and therefore remains \"in reserve\". As a share buyback is generally seen as a positive impulse, shareholders usually approve it.\u00a0<\/p>\n\n\n\n

If an authorization to buy back shares has been granted by the Annual General Meeting and the company management decides to carry it out, the process must be publicly announced. <\/p>\n\n\n\n

Now comes the actual buyback process. If the company decides to buy via the stock exchange, it will acquire its own shares here piece by piece. As a rule, there are considerable price increases due to the increased demand on the markets. <\/p>\n\n\n\n

If, on the other hand, a direct offer is chosen, the shareholders are informed of the buyback offer. In this case, the price per share that the company is prepared to pay is already fixed. This reduces the influence on the share price. <\/p>\n\n\n\n

Effects of a share buyback<\/h2>\n\n\n\n

A share buyback is predominantly viewed by investors as a positive impulse. However, there is also considerable criticism of such an approach! In many cases, investors can profit from the price increase that often accompanies the purchase and sometimes even specifically look for such securities. <\/p>\n\n\n\n

However, critics note that a share buyback has no long-term positive effect for the company. This is commonly referred to as \"price maintenance\", which often only represents a short-term gift to shareholders. The fact that a company cannot find a better use for its capital can also be seen as a negative point. <\/p>\n\n\n\n

Other risks include a lack of investment and financial reserves if the capital is used to buy back shares. However, if these points can be avoided, a buyback can be a positive signal, at least in the short term, which should please most investors. <\/p>","protected":false},"author":20,"featured_media":0,"template":"","class_list":["post-45293","glossar","type-glossar","status-publish","hentry"],"acf":{"blog_summary":"","blog_faq_schalter":"nein","faq_uberschrift":"","blog_faq_loop":null},"_links":{"self":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar\/45293","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar"}],"about":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/types\/glossar"}],"author":[{"embeddable":true,"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/users\/20"}],"wp:attachment":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/media?parent=45293"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}