share repurchases

The share purchase of a corporation's own stock in the open market (i.e., from an organized exchange, such as the New York Stock Exchange).

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Share repurchases are sometimes criticized because they could indicate that the company no longer has any profitable new business ideas in which to deploy its excess cash and therefore is repurchasing its stock. Worse yet are assertions that a company is repurchasing its stock to boost earnings per share (e.g., if a company buys back 5 percent of its outstanding stock, its earnings per share will rise, simply because its gross earnings will now be divided by a smaller number of outstanding shares). Despite these criticisms of share repurchases, they can also indicate that because the company has been successful in generating profits, the firm now has excess cash.