eli5 what are buybacks and how do they raise company profit?

Question

eli5 what are buybacks and how do they raise company profit?

In: 8

Answer 1

Buybacks don’t raise company profit. They raise profit **per share**.

Imagine each share is owned by a different person and 10% of those people sell their shares back to the company. Now, the remaining shareholders each own 10% **more** of the company and are entitled to 10% **more** of the **same** company profits.