What happens to the ownership percentage and portion of earnings for existing shareholders when shares are repurchased?

When a company repurchases its shares, it buys back a portion of its outstanding stock from the market. This action reduces the total number of shares available to the public. As a result, the ownership percentage of existing shareholders increases because they now own a larger slice of the company relative to the total shares outstanding.

In essence, if a company reduces the number of shares through a buyback, the proportion of the company owned by each remaining shareholder rises. Additionally, since the total earnings of the company are now distributed among fewer shares after the buyback, the portion of earnings allocated to each remaining shareholder also increases. This typically leads to a rise in earnings per share (EPS), which often positively affects the stock price and is seen as a signal of confidence from the company's management.

The dynamics of share repurchases lead to this increase in both ownership percentage and earnings share for existing shareholders, making the correct answer clear.