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A share repurchase is a strategy by which a company buyback its own shares from
the market, usually because management thinks the shares are undervalued,
reducing the number of outstanding shares. The company buys shares directly
from the market or from its shareholders at a fixed price. Buyback of shares is
reverse of the issue of shares by a company where it offers to take back its shares
owned by the investors at a specified price. This offer can be binding or optional
to the investors.
keep in mind that holding on to excess cash also is a viable alternative, although
that course may not be viewed favorably.Holding onto excess cash instead of
spending it on capex or returning capital to investors could spark shareholder
activism and negative PR. As stewards of shareholder value, however, CFOs may
need to consider holding excess cash for a variety of reasons. For example,
management might want use the cash to pursue strategic M&A or buy back
shares when valuations are less expensive, or have a reserve in case the economy
deteriorates. Or management might believe that the organization simply doesn’t
have the capacity to efficiently execute more capex investments.
3. If you are a financial expert or portfolio manager, whether you will choose for
company’s as a part of customer portfolio?