Buyback

A company with spare cash has a short list of things it can do with it: reinvest in the business, pay down debt, pay a dividend, or repurchase its own shares. The last of those is a buyback, sometimes called a share repurchase.

The mechanical effect is arithmetic. Profit is divided by the share count to produce earnings per share, so shrinking the share count raises earnings per share even if profit itself did not change. Anyone reading a rising EPS figure is entitled to ask which of the two numbers moved.

There is a genuine argument about buybacks, and it runs both ways. Supporters point out that returning cash to shareholders through repurchases is more tax-efficient in some jurisdictions than paying a dividend. Critics argue that money spent on shares is money not spent on the business, and that repurchases are often heaviest when a company's own shares are most expensive.