Capital Reduction

Capital reduction for a corporation usually involves the reduction of shareholder equity. In other words, shares are canceled or repurchased, a process lovingly known to commission-taking brokers as "share buybacks."

Essentially, a company is reducing their market capitalization, "the good way"...by using cash they have and/or have generated to buy back shares and shrink the capitalization of the company via reducing the total number of shares outstanding.

Companies like doing this for a variety of reasons. The process usually increases value to the remaining shareholders (pie diameter shrinks; same amount of earnings pie). And the titration can help make the company more efficient via adjustment to their capital structure for less equity and more debt (borrowing).