LEVERAGED BUYBACK

A situation where a company is repurchasing large numbers of its own shares that is financed through debt. Buybacks are done in order to raise the stock’s price, to scape overcapitalization; and guard the company from a hostile takeover attempt. It results to an increase in the price of the shares but for a short period of time, or worse, eventually, the share price might drop soon after the buyback because of purchasing it at inflated levels.