Corporate Stock REPURCHASE [Buy-Back] Programs

Posted on February 15, 2024 by Dr. David Edward Marcinko MBA

By Staff Reporters

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A stock buyback is when a public company uses cash to buy shares of its own stock on the open market. A company may do this to return money to shareholders that it doesn’t need to fund operations and other investments

Share buybacks can create value for investors in a few ways: Repurchases return cash to shareholders who want to exit the investment. With a buyback, the company can increase earnings per share, all else equal. The same earnings pie cut into fewer slices is worth a greater share of the earnings.

A stock buyback typically means that the price of the remaining outstanding shares increases. This is simple supply-and-demand economics: there are fewer outstanding shares, but the value of the company has not changed, therefore each share is worth more, so the price goes up.

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But, the practice has faced criticism from labor unions, the SEC, and even President Biden, who proposed stricter stock buyback regulations for company execs last week.

Nevertheless,

  • Stock buybacks from S&P 500 companies are expected to pass $1 trillion this year, after hitting a record $882 billion in 2021, according to Goldman Sachs.
  • In recent years, Starbucks spent $13.5 billion repurchasing shares.

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DAILY UPDATE: Uber and the Stock Markets Rebound

Posted on February 15, 2024 by Dr. David Edward Marcinko MBA

By Staff Reporters

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Stocks rose yesterday after they plunged following Tuesday’s unexpectedly hot inflation report. And, investors hit the gas pedal on Uber when the company revealed it would buy back $7 billion worth of shares in its first-ever repurchase plan.

Here’s where the major benchmarks ended:

  • The S&P 500 index rose 47.45 points (1.0%) to 5,000.62; the Dow Jones Industrial Average® (DJI) gained 151.52 points (0.4%) to 38,424.27; the NASDAQ Composite® (COMP) added 203.55 points (1.3%) to 15,859.15.
  • The 10-year Treasury note yield (TNX) fell almost 5 basis points to 4.269%.
  • The CBOE Volatility Index® (VIX) fell 1.47 to 14.38.

Small-cap shares were among the upside leaders Wednesday as the Russell 2000® Index (RUT) surged 2.4% to erase over half of its 4% nosedive on Tuesday. Banks and semiconductors were also among the strongest sectors. Energy companies were under pressure after WTI crude oil (/CL) futures dropped 1.6% in the wake of a larger-than-expected increase in U.S. inventories.

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