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Firms Furiously Buy Back Shares to Prop Up Stock Price

Thursday, 24 Jun 2010 09:52 AM

U.S. companies are showing they want to buy back their own shares at the highest rate in months as record levels of cash pile up on balance sheets.

Companies recently announced 27 new buyback programs in a week totaling $18.5 billion, the most since February, according to data from TrimTabs.

"We've seen a pretty big decline in share price, so companies are trying to prop them up, and these announcements are one way they can do that," David Santschi, an analyst at TrimTabs, told the Financial Times.

"The spike is highly unusual for June, which is not an earnings announcement month. That's a bullish sign."

Share purchases per day are estimated to still be well below 2007’s peak of $3.2 billion. Buybacks represented only 34 percent of company cash in the first quarter of 2010, the lowest level in a decade, according to UBS.

Cash available to use for buying shares is plentiful because companies have cut expenses and let inventories shrink. Buybacks allow companies to spend some of their extra cash without exposure to risks of acquisitions and increased production.

Bloomberg Business Week reports that biotechnology company Genzyme will buy back $1 billion in common stock from Goldman Sachs.

The company said proceeds from a recently concluded debt offering will be used to support the buyback, which is the first part of a broader $2 billion buyback program announced in May.

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U.S. companies are showing they want to buy back their own shares at the highest rate in months as record levels of cash pile up on balance sheets. Companies recently announced 27 new buyback programs in a week totaling $18.5 billion, the most since February, according to...
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2010-52-24
 

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