My understanding of shareholder buy backs and such is limited , so was hoping to ask some experts for a college project. Say there were 5 original shareholders of a company. 1 shareholder cashes out, and their shares are dispersed among the remaining four shareholders. Let's say at some point that fifth shareholder wanted to come back into the fold. Would they be able to facilitate the purchase of the shares if the other four remaining shareholders were in agreement? Also! Many thanks in advance for any advice or help


Let's say the 5 original shareholders all have 12 equal shares, the one cashing out could (for example) sell his 12 shares equally to the 4 remaining shareholders if they were all willing to buy. These 4 would end up with 15 shares each. Now if the cashed out shareholder wanted to come back later he could repurchase his shares in several ways, he could buy out another holder entirely (probably at a higher price) and end up with 15 shares, he could buy his original 3 shares back from each shareholder so everybody ends up with 12 shares again or anything in between these 2 options.

Perhaps worth noting that this is a private equity scenario with shareholders directly communicating with one another to buy/sell shares instead of performing transactions on a public exchange. The exact rules governing a private shareholders right to cash out/ buy in are going to vary per company.

Also the term share buyback usually carries a different meaning, namely the repurchasing of publicly exchanged shares by the company itself to reduce the total amount of shares available (and thus make each individual share more valuable in theory).

  • Probably at a higher price? Only if the company is doing well. The share holder might have thought the company was doing poorly before selling, then only came back because the price was attractive (lower). Feb 18 '17 at 12:54
  • Sure that's possible but with the "probably at a higher price" i was referring to the premium generally paid to take over another shareholders stock. Look at it this way, when this shareholder wants to get bought out he/she will generally offer the shares to the remaining shareholders first and so an outsider will have to outbid whatever offer these shareholders make.
    – Koen vd H
    Feb 19 '17 at 8:03
  • Again you assume in this illiquid market that the others are interested in buying more and have to be outbid. There is no reason to make that assumption. It's totally possible that the company would be distressed. I've made the same point twice now. I'm not going to keep repeating myself. Feb 19 '17 at 15:10
  • Well yes which is why i said "probably", the fifth shareholders desire to get back in implies a desirable development at the company. Anyway these details are hardly relevant to the question.
    – Koen vd H
    Feb 19 '17 at 15:35

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