Stock Repurchases is a process of buying back shares from the investors of the business. There are a number of reasons due to which a company undergoes repurchase process. Sometimes in order to stabilize the market price of the share the company has to repurchase its shares from investors. Repurchases helps in stabilizing the price of the share whenever it fell from a certain threshold in the market. Sometimes the company has to face pressure from the share holders to give back their money for which they have purchased the share. In order to respond the shareholder pressure the company has to buy back the shares from the investors. Sometimes a company buys back its shares in order to improve the value of earnings per share. The smaller number of the share floating in the market the greater will be the earnings per share of the company.
However it is not always that a company can easily conduct a stock repurchase program as there are a number of issues that may prohibit this process. One of the issues may be a covenant loan that may prevent a company from stock repurchase as a company needs to repay the loan in order to repurchase the shares or to pay dividend to the investors. There may be some legal violations such as some legal acts does not allow such activities that will result in altering the market value or the price of a given security that is traded on national stock exchange.
Other Related Accounting Articles: