The repurchase of common stock results in a type of reverse dilution, since the earnings per share and the market price of stock are increased by reducing the number of shares outstanding.

Question

Quizplus · Accepted Answer

When a company repurchases its common stock, there are fewer shares outstanding. This means that the same amount of earnings is divided among fewer shares, increasing the earnings per share. Additionally, with fewer shares available for trading, the demand for the stock may increase, which can push up the market price of the stock. Therefore, the repurchase of common stock results in a type of reverse dilution, as it increases the earnings per share and the market price of the stock.

The Repurchase of Common Stock Results in a Type of Reverse