ELI5, what is the buyback of shares?
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Imagine if 5 people owned a business together.
One of them wants out of the business. He could just sell his share to one of the four other owners or he could sell a quarter of his share of the company to each of the 4 others.
This can get complicated really fast when more and more people own a company together though.
An alternative is that the company itself uses its profits to buy back the share of this one guy in itself.
The endresult is the same: each owners share in the company has grown a bit.
A company doing share buy back basically pays some of its owners to give up their stake of ownership in the company so that the other owners own more of it.
It gets controversial when companies sue their profit to buy back lots of shares and then a short while later claim they need a governemtn bailout because they have no money left.
They indirectly transferred the profits to the shareholders by using the buyback to make the value of each remaining share higher.
It doesn’t help that the people running the company often get bonuses in the form of shares in the company, so they profit directly from increasing the size of those shares via buybacks.
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