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

Stock buybacks are when a company gives x% over the current value of a their own stock to buy it back from the current holder. Simple supply and demand takes over, less shares means each individual share is worth more.

So stock buybacks are done when the company calculates that the increase in price per share that they hold will be greater than the money spent on buying the stock