Share Repurchases Leave Cos. Susceptible To Litigation

Share repurchases, now the dominant way U.S. public companies return capital to shareholders, can unintentionally shift corporate control and create significant litigation risk. By reducing the number of outstanding shares, buybacks automatically increase the ownership percentage and voting power of remaining shareholders—sometimes significantly—without requiring them to pay a control premium.

In “Share Repurchases Leave Cos. Susceptible To Litigation,” Amit Bubna draws on data from 2015 to 2024 and shows that concerns about ownership change are widespread rather than hypothetical. In over 200 repurchase announcements, the largest shareholder’s ownership could have increased by over 5%, potentially conferring de facto control even without crossing the 50% threshold. Recent cases involving Hertz and Liberty Media further illustrate how repurchases can allegedly allow dominant shareholders to gain governance, tax, or merger-related advantages without compensating minority investors. Dr. Bubna advises that boards, investors, and attorneys must closely evaluate buyback programs—especially at companies with concentrated ownership, large cash holdings, or potentially captured boards—because share repurchases remain a potent corporate governance tool that is increasingly susceptible to legal challenge.