What effect does stock repurchase have on owners' equity?

The capital invested by investors is stocks, and repurchasing stocks is equivalent to recovering part of the capital originally invested. At this point, the company's assets will decrease, but its liabilities will not change. Therefore, the owner's equity will be relatively reduced. Usually, companies buy back shares and cancel them.

The Company repurchases and cancels shares for the following purposes:

1. Anti-takeover of listed companies: Share repurchase will affect the number of shares issued by the company, thus reducing the number of shares purchased by the acquirer from the market and reducing the risk of being acquired.

2. Improve the efficiency of the use of funds: When the disposable cash flow of the enterprise exceeds the cash flow required by the company's investment projects, the company can buy back some stocks with sufficient cash flow at this time, thus increasing the profitability of each stock, improving the return on net assets and reducing the burden of the company's profit indicators.

3. Stabilize the company's share price and maintain the company's image: When the listed company's share price is at a low level and lower than its intrinsic value, the listed company will cancel the stock repurchase operation to stabilize the stock price, enhance investor confidence and maintain the company's image.

What does stock repurchase mean?

It means that listed companies buy back a corresponding number of their own shares in cash in the stock market. The repurchased shares may be cancelled, or they may be kept as inventory and no longer issued. Due to share repurchase, the number of shares circulating in the market decreases, while the net assets of listed companies remain unchanged, so the share price will rise, thus increasing the profit per share.