1. Why do companies buy back their own stock?

Answer 1

It's a way to return money to shareholders in lieu of paying a dividend.

When a company buys back its own stock, it reduces the number of shares outstanding. All other things being equal if the number of shares outstanding is reduced each of those remaining shares is more valuable. This causes the stock to go up and enriches shareholders. It is often done in lieu of paying dividends because dividends are taxed.

Answer 2

There are a few of reasons. One is to not be delisted. The rules change from exchange to exchange. The NYSE stocks can't fall under $5 for a year or they will be delisted.

Another reason is the company has no place they want to spend the money and sitting on money upets shareholders. Companies usually give out dividends, but they can buy back th stocks to at least temporarly raise the price because there is less shares out there to buy.

Companies might not like the new rules or don't want to fuss with shareholders when they restructure. They can buy back all the stock and take the company private.

Answer 3

The company may think the stock is undervalued. Sometimes its an attempt to raise the stock price because outstanding shares are reduced.. Announced stock buybacks dont always happen, or not as much as authorized. They can use the stock bought back for employee stock option programs or to sell it back in the open market to raise money when the stock goes back up.

Answer 4

It could be for good or bad reasons. They could buy back their shares because they believe the stock is a good value/good investment for share holders (that's good). However, sometimes I believe CEOs and directors have companies buy back their shares to drive up the price of their stock-options (that's bad).

Answer 5

To maintain control over ownership.