Understanding Share Buyback And Its Rules

[Shola Sholaz]

Usually companies sell shares to investors. But a company can also buy its shares from shareholders. When it does so, the company is said to have 'Buy Back' its shares. Many shareholders do not understand the concept of "share buyback".
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It is simply the acquisition by a company of its own shares from its shareholders.
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Generally, where a company buys back its own shares, it effectively reduces its issued share capital by reducing the number of shares held by the public such that even if the profits of such company were to remain the same, the company's earnings per share would increase.
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The expectation of the Securities and Exchange Commission (SEC) is that the application of the share buyback (particularly in present situation where the stock price of most quoted companies are depressed), would provide a viable means of revaluing the price of the stocks quoted on the Nigerian Stock Exchange (NSE).