Let me start this post by wishing each of you a very Happy Thanksgiving. I have many things to thank God for and want to say how much I appreciate you for taking your time to read thoughts I share and for all your support. May God bless you!

I’m going to offer a brief introduction today to corporate stock buybacks and will continue it next time. My posts on this theme certainly won’t comprehend the theme of buybacks but hopefully will be useful commentary.

Companies authorize a certain (maximum) number of common stock shares that can be issued into the market. Rarely are all shares authorized for issuance actually issued. Companies want to authorize enough shares to provide for future equity capital raises, if needed. At the time authorized shares are issued, they are also referred to as “outstanding.” Outstanding shares can be repurchased. Repurchases or “buyback” are very common and generally viewed favorably by stockholders.

There are a number of reasons why companies may repurchase shares and in the next post, I’ll introduce some of that discussion. The simple point of this post is to briefly describe the nature of share buybacks. Share buybacks serve to reduce the number of outstanding shares. Shares that are bought back can be retired or they can put in the corporate treasury.  When repurchased shares are retired they not only are reduced from the outstanding share count but also reduced from the issued number of shares. When repurchased shares are placed in the corporate treasury, they are not retired and are referred to as “treasury shares.” While treasury shares are reduced from the outstanding share count, they remain a part of the issued share count.

I’ll continue the conversation next time. Again, Happy Thanksgiving friends.