Share Buyback

A share buyback is a company repurchasing its own stock, shrinking the share count so each remaining share owns a larger slice of the business. The same net income spread over fewer shares mechanically raises earnings per share: retire 5% of the float and EPS climbs about 5% with zero operational improvement.

Most buybacks run under SEC Rule 10b-18, a safe harbor that caps daily repurchases at 25% of the stock's average daily volume and restricts timing and pricing to keep the company from manipulating its own tape. Since January 2023, US buybacks also carry a 1% federal excise tax on the net amount repurchased.

Buybacks are the flexible sibling of dividends — a dividend cut is a headline event, while a paused buyback barely registers. The critique writes itself when companies buy high: repurchases historically peak alongside markets and dry up in selloffs, the opposite of value-adding timing.