Buyback
Market basicsA company repurchasing its own shares, reducing the share count.
In plain terms
Value-creating when the stock is cheap, value-destroying when it is expensive.
1678 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
Showing 9 terms
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Acceptance ratio
Market basicsThe proportion of tendered shares a company actually accepts in a buyback.
In plain terms
This, not the premium, decides what you earn. A 20% premium at 15% acceptance is a 3% return.
Deemed dividend
Regulation & taxA receipt the income-tax law treats as a dividend although it does not arise from an ordinary declaration — including, for buybacks from 1 October 2024, the whole consideration a shareholder receives on tendering shares.
In plain terms
The head of income decides what you keep. The entire amount is taxed at your slab rate rather than the gain at the equity rate, and the cost of the shares is not set against it — it becomes a capital loss in a different part of the return.
Entitlement ratio
Market basicsIn a tender-route buyback, the number of shares a holder may tender for every so many held on the record date, stated separately for the reserved small-shareholder category and for everybody else.
In plain terms
It is not the acceptance ratio. The entitlement is what you are allowed to offer; the acceptance ratio is what is actually bought once every tender is counted. You may tender beyond your entitlement, but the excess is considered only after entitled tenders in your category have been dealt with.
Financing cash flow
AccountingAlso called: Cash flow from financing
The cash flow bucket covering borrowing and repayment, share issues and buybacks, and dividends paid.
In plain terms
Read it alongside the other two. Negative operating cash flow with a large positive here describes a company kept alive by fresh borrowing rather than by trading.
Letter of offer
Regulation & taxThe document dispatched to shareholders in an open offer or a tender-route buyback, setting out the price, the size of the offer, the dates of the tendering window and the offeror’s stated intentions, after the regulator has commented on the draft.
In plain terms
The one document in the sequence written for you rather than for the exchange, and the only place several of those things are stated. It goes to the address on your depository record, which is a reason to keep that record current.
Special situation
Fundamental analysisA corporate event — demerger, buyback tender, delisting offer, rights issue or index change — that creates a mechanical mispricing independent of business quality.
In plain terms
The terms are published, the timeline is fixed and the outcome is largely arithmetic. They persist because they are boring, small and time-limited, which keeps large funds away.
EPS
AccountingEarnings per share — net profit divided by shares outstanding.
In plain terms
Can rise from buybacks alone. Always check net profit rose too.
Offer for sale
Market basicsAlso called: OFS
A promoter or large holder selling part of their stake to the public through the exchange.
In plain terms
The mirror image of a buyback — here the owner is reducing their stake, which deserves a question.