A company may purchase treasury stock if they are trying to avoid a takeover.

Question

Quizplus · Accepted Answer

When a company buys back its own shares, it reduces the number of outstanding shares available for purchase by potential buyers, making it less attractive as a takeover target. This is because the cost of acquiring a controlling interest in the company becomes significantly higher, making it less profitable for an acquirer to pursue the takeover. Therefore, a company may purchase treasury stock as a defensive measure against hostile takeover attempts.

A Company May Purchase Treasury Stock If They Are Trying