Corporations can repurchase their own shares



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Corporations can repurchase their own shares

Corporations can repurchase their own shares on the stock market. This may result in soaring share prices but the corporation may have a lot of funds and use them. Higher share price will result in higher market value. Corporations can repurchase their shares if their net cash is positive. A corporation with high debt will never repurchase its shares. It may decide to issue more shares and use the cash to pay debt.

When shares are purchased, they are destroyed and the number of outstanding shares is reduced. The reduction can go down to 10 million shares but not lower. The number of shareholders may be reduced and if only one shareholder remains, the corporation is not public any more. If the one shareholder is a country, it becomes a state corporation. If the one shareholder is an enterprise, it becomes a private corporation.

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