Share buy-back

Repurchase of shares on the stock exchange by the issuing company.

Until some years ago, share buy-backs were allowed in Germany only in certain cases. The German law regulating supervision and transparency in the corporate sector (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich), enacted in May 1998, stipulates that companies can buy back up to 10 percent of their own shares on the stock exchange. The company's shareholders must approve the buy-back at the Annual General Meeting.

Companies buy back their own shares when they wish to invest surplus capital or thwart a hostile takeover. Following a buy-back, the company in question has fewer shares on the market. As a result, the earnings per share increase, which in turn usually causes the share price to rise.

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