proportionate redemption

Proportionate Redemption

A way of conducting a management buyback in which a stockholder maintains the same percentage of ownership in the company that he/she had before the buyback. A management buyback is the act of a company buying its own shares to reduce the number of shares outstanding; a proportionate redemption exists in order to protect stockholders from the risk of loss in the buyback. For example, if a stockholder owned 4% of the company before the buyback, the company will structure the buyback such that he/she continues to own 4% after the buyback.

proportionate redemption

A partial stock buyback in which a stockholder maintains the same ownership percentage after selling a portion of his or her shares back to the issuer.