The Buyback Monitor - April 2013: Share Buyback Profits of 232 Firms 2000-2013

Abstract

This report expands into early 2013 studies of the raw performance (profitability) of $457.6 billion of buybacks executed since 2000 by a sample of 232 corporations. The sample companies, drawn mainly from the technology sector, enjoy total equity market value today of $1.221 trillion. 75.0% of sampled companies engaged in buybacks and, in total, paid 38.9% of their current equity market value for buybacks over the past decade.

51.1% of the sampled buyback programs are now profitable. For the group overall, after 13 years, repurchased shares today are worth 13.0% more than their cost. That profit on buybacks equals 5.1% of the group’s current equity value and equates to a 3.7% increase in the group’s stock price before adjustments. After adjustment for foregone interest income net of dividend savings, buybacks since 2000 have provided roughly a 0% benefit to the stock price of the sample group overall; the impact of buybacks on the typical company’s stock price was significantly worse.

This survey ranks each of 232 individual companies’ buyback statistics by:

• Percentage buyback profit (return on cash invested in buybacks), • Buyback profit as a percent of current equity market value, • Buyback impact on current stock price (excluding net interest adjustment), and • Alphabetically

Gains on the largest, most profitable buyback programs added 16% - 55% to company stock prices before adjustment for net interest expense. In rank order, among large companies, currently the most successful programs include those by CYMI, VRSN, CTXS, ADSK, SYMC, SNPS, and ORCL; among smaller companies, the most successful buybacks include those of STMP, CRUS, IDCC, and EFII.

Losses on the largest, least profitable buyback programs cut company stock prices by 13% - 45% before adjustment for net interest expense. In rank order, among large companies, currently the least successful buybacks include those by DELL and JNPR; among smaller companies, the least successful buybacks include those of TLAB, ISIL, LOGI, WFR, RMBS, QLGC, and IDTI.

This report on buyback profitability is heavily dependent on current stock prices. As stock prices fluctuate in the future, the reported profitability of buybacks by the group overall and the rankings of individual companies will change.

Keywords: repurchase, buyback, governance, equity accounting

JEL Classification: D21, G24, G30, G31, G32, G34, G35, M4