Final answer:
A targeted repurchase occurs when a firm buys back shares from specific stockholders. This is different from open market buybacks and is sometimes used as a takeover defense or to repurchase undervalued shares. A firm initially receives funds through an IPO, but not in subsequent shareholder transactions.
Step-by-step explanation:
Targeted repurchase occurs when a firm repurchases shares from specific individual stockholders. This action contrasts with open market buybacks where the company purchases its own shares on the stock exchange, which can be from any shareholders willing to sell at the market price. A targeted repurchase often happens when the company wishes to fend off a particular shareholder, such as in a takeover defense scenario, or when it believes that the shares of certain shareholders are undervalued and repurchasing them would benefit the company financially. When a company goes public through an initial public offering (IPO), it receives financial capital by selling stock. Afterwards, the firm does not receive any funds from transactions between shareholders. However, shareholders who sell their stock can earn a rate of return in the form of dividends and capital gains.