The Buyback Monitor - July 2009: Corporate Stock Buyback Profits of 273 Firms from 2000 into 2009
40 Pages Posted: 13 Jul 2009
Date Written: July 13, 2009
Few purely financial decisions rival stock repurchase programs in their bearing on the well-being of shareholders. Absent better financial reports on buybacks, an occasional tally of results seems appropriate. The current “Monitor” extends an earlier study back to 2000 to look at profitability of $263 billion of buybacks executed by a sample of 273 corporations, largely in the technology sector, with total equity market value of $655 billion. 66% of sampled companies engaged in buybacks. While this studies’ reporting methodology tends to significantly overstate buyback profitability, only 25% of buyback programs are currently reported to be profitable.
The average sampled company that engaged in buybacks paid out 43% of its current equity market value to buy shares that subsequently declined in value by 19.7%. Had buybacks not been executed, share prices for these companies now would be at least 8.4% higher (or, after adjustment for bias in methodology, more than 13% higher).
Companies with the best performing buyback programs during the sample period include CY, STEC, CTXS, MFE, ARRS, FLIR, and ORCL. These companies’ buyback programs have lifted their share prices in the range of 10%. CY ranks first place (16%).
The list of companies with poorly performing buybacks is much longer. Notable among these are CDNS, NSM, IDTI, VRSN, ISIL, NOVL, TER, MXIM, LLTC, KLAC, NVLS, and AMAT. Absent buybacks, these companies’ shares would be trading at least 27% higher, and, in many cases, much more (109% for CDNS; 81% for NSM).
Detailed results for individual companies are listed by: • Largest percentage profit (return on cash invested in buybacks) • Largest percentage benefit (consequent change in stock price) • Alphabetically
Keywords: Stock buyback, stock repurchase, share buyback, share repurchase,10b5-1, 10b-18, accelerated stock repurchase, ASR
JEL Classification: G30, G32, G35, M40, M41
Suggested Citation: Suggested Citation
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