• Share Buy Back and Delisting

    Share buyback refers to the process through which management of the company buys back some shares from the shareholders in the market using cash. Normally the company’s management pays some premium over the current market price to encourage the shareholders to sell their holding shares.

    Share buyback is done because of

    • To utilize huge retained earnings by buying back some shares from the market.
    • To increase the promoter or management holdings to protect itself from any potential takeover or acquisition threat.
    • To increase promoter’s holding to get more voting rights.
    • To make use of very low current share price in the market.

    To buy back the shares the company requires shareholders’ approval and the whole process is regulated by the market regulator.

    Delisting refers to the process by which company buy back all the existing shares from the existing shareholders in the market. Delisting is done because of

    • When the company goes out of business and close the company
    • When the company declares bankruptcy.
    • After the takeover or acquisition, the acquirer company wants to buy back all the shares from the market.
    • The company does not satisfy the listing requirements any more.
    • Company’s share price is very low and promoters want to increase their holding by buying shares from the market.
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