20 Possible Reasons Behind Company’s Share Buyback Offer

Possible Reasons Behind Company’s Share Buyback Offer Women investor thinking about the different reasons behind buyback offer.

(6) Providing Additional Exit Route To Big Shareholder In Thinly Traded Stocks

It is one of the most secret reasons to engage in stock buyback activity. Stock liquidity is necessary to make quick entry & exit without a substantial loss in value.

If a stock is illiquid then it becomes hard for shareholders to buy & sell shares quickly. It is due to the absence of enough traders or investors in the script.

Sometimes, larger shareholders may be looking to liquefy their holdings then stock buyback activity gains significance. Stock buyback provides the needed liquidity in the stock to buy those shares from them.

Thus, an additional exit route is provided to larger shareholders or institutional investors to safeguard the interest of minority shareholders.

[Read Also: 14 Things High Public Shareholding Pattern Reflects In Stocks]

(7) Initiating Accumulation Or Distribution Of Shares In A Bigger Range

It is one of the most amazing reasons to engage in stock buyback activity. Most of the stocks trade in certain price range.

This share trading process continues until some positive or negative news strike the market. Depending on the news item, the stock may shift its range either upward or downward.

Similarly, certain stocks are stuck in a particularly trading range for a long time until breakout happens on either side.

Stock buyback announcement can play a significant role in triggering a shift of trading range within a stock of underlying company. Once the stock is shifted to bigger range, the trading process for accumulation or distribution of shares again continues.

Thus, stock buyback provides a much needed trigger to initiate a technical breakout from a trading range.

Image Source

Recommended Posts

About Editing Staff
At GetUpWise, we are a team of professional writers from different areas of subjects. We are conducting thorough research on each & every topic from highly reputed sources before writing any piece of article. Once research is done, we try our best efforts to provide informative piece of articles in an easy to understand manner. It is something that is extremely essential to meet our goal while reaching & offcourse building a strong online community. We do update our articles from time to time in order to provide the most latest information quickly. Thus, our articles can be used as a "way to gain smartness".

Leave a comment

Your email address will not be published.



This site uses Akismet to reduce spam. Learn how your comment data is processed.

Get Instant Access To GetUpWise Posts

Subscribe Us

Please do verify your email address by clicking a link sent to your email.

Secured By miniOrange
More in Stocks & Mutual Funds
Best Trading Strategies To Make Money In Rights Issue
6 Best Trading Strategies To Make Money In Rights Issue

(6) Subscribing For Excess Rights Shares Beyond Entitlement It is one of the most unbeatable methods to beat a company’s...