US Companies See Record Stock Buy Back In 2022 with $319B Authorized YTD: FT

U.S. companies are rushing to repurchase large volumes of shares to take advantage of recent stock market volatility and reassure investors as growth slows, reported Financial Times.

The management uses the share buybacks to prop up demand for their stock and increase their profitability on an EPS basis by reducing the number of shares in circulation.

What happened: According to Goldman Sachs data, a record $319 billion of new share buybacks have been authorized so far this year, with rising numbers of companies using "accelerated" deals to buy large volumes as quickly as possible while their share prices are depressed.

There were $267 billion in share buybacks at the same point in 2021. "The breadth of different industry groups buying stock is the highest we've seen in a few years, and volumes have increased. That's much more due to the market backdrop as opposed to anything else", Michael Voris, Goldman Sachs' head of structured equity, told FT.

"The buyback business ironically tends to pick up in periods of volatility because there's a downdraft, and so people who are flush with cash look at their opportunities," stated Craig McCracken, co-head of equity capital markets at Wells Fargo.

Why It's Important: McCracken says, "It's a sign of the underlying strength, that companies expect things will continue to be fairly positive, so they're using their cash to buy back shares instead of keeping it on the balance sheet."

According to an analysis compiled by Sentieo, companies have publicly announced more than $33 billion of accelerated share repurchases.

ASRs allow them to buy back large volumes in a matter of months. "Accelerated repurchases send a strong signal to shareholders because the cash is committed to buy back the stock upfront," stated Goldman's Voris.

Photo via Stevepb via Pixabay