60 Pages Posted: 6 Jul 2011
Date Written: July 5, 2011
This report expands through early 2011 studies of the raw performance (profitability) of $383.5 billion of buybacks executed since 2000 by a sample of 252 corporations. The sample companies, drawn mainly from the technology sector, enjoy total equity market value today of $1.240 trillion. 69.8% of sampled companies engaged in buybacks and, in total, paid 32.7% of their current equity market value for buybacks over the past decade.
Higher stock prices during the last year have markedly improved the profitability of past buybacks. Since a year ago, stock prices for the sampled group are up about 33.2%, in line with major U.S. market indexes. 59.7% of the last decade’s sampled buyback programs are now profitable, shares bought back are worth 8.8% more than their cost, and buybacks in total have contributed 2.9% to the group’s current stock price. Because larger buybacks by larger companies did better than more numerous smaller programs by smaller companies, the typical company’s stock price saw a -5.7% contribution from buybacks. After allowance for foregone net interest income, the last decade’s corporate share buybacks have provided little more than 0% benefit for the group overall and pushed the typical company’s stock price down close to 10%.
The most profitable buyback programs had a 15.0%-43.1% positive impact on stock prices. In rank order, among large companies, these include programs by CTXS, ORCL, and EMC; among smaller companies, programs by CY, NVLS, ADSK, CRUS, IDCC, VRSN, and POWI; among the smallest companies, those by STMP, OPLK, and ISSI.
Absent buybacks, companies with the most significantly unprofitable programs would now have share prices trading 14.9% to well over 100% higher. In rank order, among large companies, these include unprofitable programs by DELL, MSI, CSCO, and AMAT; among smaller companies, programs by ISIL, TLAB, CDNS, IDTI, WFR, LOGI, and ELX; among the smallest companies, those by DITC, HTCH, ADPT, PTIX, OPWV, EXAR, DSPG, EXE, MTSN, SIGM, and VTSS.
Keywords: Stock Repurchase, Stock Buyback, Share Buyback, 10b-18, 10b5-1, CTXS, ORCL, EMC, CY, NVLS, ADSK, CRUS, IDCC, VRSN, POWI, DELL, MSI, CSCO, AMAT, ISIL, TLAB, CDNS, IDTI, WFR, LOGI, ELX, Vermaelen, Weisbenner, Kahle, Lie, Jagolinzer
JEL Classification: G35, G30, M40, M41, G34, G32
Suggested Citation: Suggested Citation
Gumport, M. A., The Buyback Monitor – July 2011: Share Buyback Profits of 252 Firms 2000-2011 (July 5, 2011). Available at SSRN: https://ssrn.com/abstract=1879508 or http://dx.doi.org/10.2139/ssrn.1879508
By M. Gumport
By M. Gumport