When a company buys back its own shares from investors, this is known as a share buyback or share repurchase. It can be viewed as an alternative, tax-efficient method of returning funds to shareholders. When shares are repurchased, they are considered canceled, but they can be kept for future redistribution.
A company may choose to repurchase shares for a variety of reasons, the most important of which is that its stock is undervalued and the company wishes to increase demand. Share repurchases reduce the number of shares in circulation, which can raise the share price and earnings per share (EPS).