I own some stock in Apple. Yesterday they announced they will be doing a stock buyback. Will I be compelled to sell the stock back to them? Will I receive some kind of offer from Apple? Will nothing happen?
I’ve searched for this and can only find articles about why companies do stock buybacks, not from the perspective of the shareholder
In: Economics
Stock buybacks play the same role as dividends: returning some value stored in the company back to investors.
Dividends do this directly by paying a small sum to the holder of each share. The problem is this money is taxed as it’s received.
Enter stock buybacks: the company goes to the open market and uses its own cash to buy up stock and (usually) retire the stock. Now there is less shares representing the same company (minus the amount used for the buybacks), so each share should be worth more. This returns value to those shareholders who are still holding, but without an immediate tax consequence.
So for you, all that happens is that the price will likely got up a bit.
There is one exception case: in the case of a takeover or the company going private, if the board (or shareholders if the charter requires it) approve a purchase of the company by other entities, then the shareholders can be forced to sell their shares. This is more common with smaller companies, and for a company the size of Apple would effectively be impossible as there are no entities in the world that could afford to buy 100% of Apple other than maybe a handful of governments (and even then it’s questionable).
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