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What you will learn
- Calculate repurchase cost and the remaining share count.
- Separate higher earnings per share from higher total earnings.
- Follow the ownership percentage of a holder who does not sell.
State what happens to the repurchased shares
H&M’s announcement dated 29 May 2026 provides a published example of cancelling repurchased treasury shares. Our quantities and amounts do not come from that company. We instead use 1,000 ordinary shares, cash of SEK 5,000 and a purchase of 100 shares at SEK 20 each. All 100 are then cancelled in the model.
The buyback happens before the next full practice period. The calculation contains no other share changes, fees, taxes, borrowing or effects on interest and operations. Before and after cases assume the same SEK 1,000 total profit for separate full periods of equal length. This is a comparison premise, not a forecast that buybacks leave real profit unchanged.
If the table does not fit, scroll it sideways.
| Component | Before | After |
|---|---|---|
| Outstanding shares | 1,000 | 900 |
| Cash, SEK | 5,000 | 3,000 |
| Assumed full-period profit, SEK | 1,000 | 1,000 |
| Shares of a continuing holder | 20 | 20 |
The company pays; the continuing holder does not sell
The purchase costs 100 × 20 = SEK 2,000, leaving cash of 5,000 − 2,000 = SEK 3,000. Outstanding shares after cancellation become 1,000 − 100 = 900. A holder retaining their 20 shares has not received the cash payment for shares sold by other holders.
The ownership percentage rises from 20 / 1,000 = 2 percent to 20 / 900 × 100 ≈ 2.22 percent. The holder’s share quantity stays constant while the denominator falls. A larger percentage of a company with less cash does not by itself determine a higher holding value. The post-buyback price is absent from this table.
Higher EPS can result from a smaller denominator
Within each of the complete periods being compared, share count remains constant. EPS before is 1,000 / 1,000 = SEK 1 and afterwards 1,000 / 900 ≈ SEK 1.11. Total profit is still 1,000. The change in earnings per share results from distributing that same profit across fewer outstanding shares.
If a repurchase or new share issue instead happens during the reporting period, the denominator needs to account for both quantity and time. The weighted-share lesson explains that difference. This comparison excludes preferred shares, non-controlling interests, options and other possible dilution effects; it is not a complete analysis of a company report.
Distinguish announcement, execution and cancellation
Separate an announced repurchase programme from completed purchases and from a cancellation decision. Check dates and which count a measure uses. Actual treasury shares may also be handled differently from our chosen cancellation case. Do not always reduce total registered share count merely because a report mentions the word buyback.
Then write down which question remains open: price, total profit, cash needs or timing. Company search can help you investigate the correct company, but this page promises no buyback trading, automatic EPS adjustment or recommendation in Investiq. A higher EPS in a calculation exercise does not establish a future price increase.
Try it yourself
A new case starts with 500 shares and SEK 2,000 cash. The company buys and cancels 50 shares at SEK 12 before the next full period. Both comparison periods assume SEK 900 profit. You retain 9 shares. Calculate cash, share count, later EPS and ownership.
Show the solution and explanation
Cash becomes SEK 1,400 and share count becomes 450. Later EPS is SEK 2. Your 9 shares represent 2 percent of the remaining shares.
50 × 12 = 600; 2,000 − 600 = 1,400. 500 − 50 = 450; 900 / 450 = 2. 9 / 450 × 100 = 2. Beforehand EPS was SEK 1.80 and ownership was 1.8 percent.
Check your understanding
Has total profit risen when EPS rises from 1 to about SEK 1.11 in the main case?
No. Both cases assume SEK 1,000 total profit; outstanding share count has fallen.
Does a holder who keeps their shares receive the repurchase cash payment?
No. In the model that payment goes to holders selling shares to the company.
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Sources and examples
- H&M, 29 May 2026: published cancellation of repurchased shares
- IFRS Foundation: public IAS 33 overview on earnings and weighted share count
The sources support the factual explanations. Calculations and exercises were created for this lesson. Amounts and price changes are invented unless stated otherwise.
This material is educational and does not recommend securities to buy. A simulated result does not guarantee a future result.
