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When a company announces a share buyback program, who do they actually buy back the shares from? Openly traded shares on a stock exchange? Is there a fixed price that they buy back at?

If I own shares in that company, can I get them to buy back my shares?

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    en.wikipedia.org/wiki/Share_repurchase . You cannot make a company buy back its own shares, unless you are a major shareholder and the motion has to be agreed to by shareholders in majority in the AGM. – DumbCoder Jul 19 '13 at 16:44
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Something to note is that when a company announces a share buyback program there is usually a time frame and amount of shares that are important details as it isn't like the company will make one big buy back of stock generally. Rather it may take months or even years as noted in the Wikipedia article about share repurchases.

Wikipedia covers some of the technical details here but to give a specific set of answers:

When a company announces a share buyback program, who do they actually buy back the shares from?

From the Wikipedia link:

"Under US corporate law there are five primary methods of stock repurchase: open market, private negotiations, repurchase 'put' rights, and two variants of self-tender repurchase: a fixed price tender offer and a Dutch auction."

Thus, there are open market and a couple of other possibilities.

Openly traded shares on a stock exchange?

Possibly, though there are other options.

Is there a fixed price that they buy back at?

Sometimes. I'd think a "fixed price tender offer" would imply a fixed price though the open market way may take various prices.

If I own shares in that company, can I get them to buy back my shares?

Selective Buy-Backs is noted in Wikipedia as:

"In broad terms, a selective buy-back is one in which identical offers are not made to every shareholder, for example, if offers are made to only some of the shareholders in the company. In the US, no special shareholder approval of a selective buy-back is required. In the UK, the scheme must first be approved by all shareholders, or by a special resolution (requiring a 75% majority) of the members in which no vote is cast by selling shareholders or their associates. Selling shareholders may not vote in favor of a special resolution to approve a selective buy-back. The notice to shareholders convening the meeting to vote on a selective buy-back must include a statement setting out all material information that is relevant to the proposal, although it is not necessary for the company to provide information already disclosed to the shareholders, if that would be unreasonable."

Thus it is possible, though how probable is another question.

While not in the question, something to consider is how the buybacks can be done as a result of offsetting the dilution of employees who have stock options that may exercise them and spread the earnings over more shares, but this is more on understanding the employee stock option scenario that various big companies use when it comes to giving employees an incentive to help the stock price.

  • On the last question, typically the company buys the shares back at market price. In theory, the announcement of a share repurchase plan increases demand as well as the market price all else being equal. So in theory you can just sell at the market price and don't need to sell "to" the company specifically. – JAGAnalyst Jul 19 '13 at 18:02
  • Could selling back to the company get around a brokerage commission for selling? That may still be an open question. – JB King Jul 19 '13 at 18:03
  • Again, typically the company will simply buy the shares at market price on the open market as per KeithS' answer below. Since the sale of securities is highly regulated, there really isn't a common mechanism for buying or selling stock that "avoids" commissions/fees, although there are many ways to minimize the cost of the trade. Also, it would be uneconomic for the company to make many small deals with individual investors vs. the market. – JAGAnalyst Jul 22 '13 at 15:12
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The short version of JB King's excellent answer is that the company will typically buy back shares from the open market at market price. Sometimes, it will specifically target larger stakeholders, even controlling interests, who are making noise that they want to divest; if such an investor were to just dump their stock on the open market, neither the investor nor the company would be very happy with the resulting price collapse. In those cases, the company may offer an incentive price above market rates.

In recent times, the investor looking to divest has often been the U.S. Government, who received stock in return for bailouts, and (with notable exceptions) turned a modest profit on many of them. Not enough to break even on the entire bailout, but the Government didn't just throw $700 billion in taxpayer money down a hole as conservative pundits would have you believe.

In the '80s, a specific type of buy-back was made famous, called the "leveraged buyout". Basically, the company took out a huge loan against itself, and used that money to buy up all the company's publicly-traded shares, essentially becoming a private company. This became a popular tool among private equity groups, for better and worse.

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