What is Repurchase Price?

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The repurchase price refers to the price paid by a company or institution to a shareholder when it repurchases its own stock from the shareholder. The repurchase price is usually determined through negotiation between the company or institution and the shareholder, and can be a fixed price or determined based on market price.

Definition

The repurchase price refers to the price a company or institution pays to shareholders when buying back its own shares. This price is usually negotiated between the company and the shareholders and can be a fixed price or determined by the market price.

Origin

The concept of stock repurchase originated in the early 20th century as companies began to realize the benefits of managing capital structure and shareholder value through buybacks. Particularly in the 1980s, repurchases became a common capital management tool among American companies.

Categories and Features

The repurchase price can be categorized into fixed price and market price. A fixed price repurchase is determined when the company announces the buyback plan, offering shareholders a certain selling price. Market price repurchase is conducted according to market conditions, with prices fluctuating with the market. Fixed price repurchases provide price certainty, while market price repurchases offer flexibility to adapt to market changes.

Case Studies

A typical example is Apple's stock repurchase program initiated in 2012. Apple announced a fixed price buyback to increase earnings per share and enhance shareholder value. Another example is Microsoft's 2019 buyback plan, which used a market price repurchase strategy to flexibly respond to market fluctuations.

Common Issues

Common issues investors face regarding the repurchase price include determining whether the repurchase price is reasonable and understanding its impact on the company's financial health. A reasonable repurchase price should reflect the company's intrinsic value, while an excessively high price might increase the company's financial burden.

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Transfer Payment

A transfer payment is a one-way payment to a person or organization which has given or exchanged no goods or services for it. This contrasts with a simple "payment," which in economics refers to a transfer of money in exchange for a product or service.Generally, the phrase "transfer payment" is used to describe government payments to individuals through social programs such as welfare, student grants, and even Social Security. However, government payments to corporations—including unconditional bailouts and subsidies—are not commonly described as transfer payments.

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Registered Representative

A registered representative (RR) is a person who works for a client-facing financial firm such as a brokerage company and serves as a representative for clients who are trading investment products and securities. Registered representatives may be employed as brokers, financial advisors, or portfolio managers.Registered representatives must pass licensing tests and are regulated by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). RRs must furthermore adhere to the suitability standard. An investment must meet the suitability requirements outlined in FINRA Rule 2111 prior to being recommended by a firm to an investor. The following question must be answered affirmatively: "Is this investment appropriate for my client?"

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Loyalty Program

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Confidence Interval

A confidence interval, in statistics, refers to the probability that a population parameter will fall between a set of values for a certain proportion of times. Analysts often use confidence intervals that contain either 95% or 99% of expected observations. Thus, if a point estimate is generated from a statistical model of 10.00 with a 95% confidence interval of 9.50 - 10.50, it can be inferred that there is a 95% probability that the true value falls within that range.Statisticians and other analysts use confidence intervals to understand the statistical significance of their estimations, inferences, or predictions. If a confidence interval contains the value of zero (or some other null hypothesis), then one cannot satisfactorily claim that a result from data generated by testing or experimentation is to be attributable to a specific cause rather than chance.