VigilantJK's  Instablog

Send Message
  • Share Repurchases : Costly Smoke But Missing Mirror? 0 comments
    Jul 2, 2012 2:30 PM | about stocks: PG, XOM, WBA, INTC, QCOM

    Most companies take special pride and efforts to mention how they have been "returning wealth to shareholders". Some include amount of repurchases over last X-years, available authorization and timeline. But most companies carefully avoid mentioning weighted average share repurchase prices thru' the relevant time-span. What I like to call classic "repurchase smoke" or cherry-picking (selective) information on repurchases.

    Some companies like Procter & Gamble (NYSE:PG) provide some information but generally I have found it is not clear or enough and lot left for vigilant shareholder to find and connect the dots and calculate.

    For example : Qualcomm (NASDAQ:QCOM) included a yearly graphic of "Cumulative $17.2 Billion Returned to Stockholders" in Q2'FY12 Earning slide 11.

    Slide and Graphic is helpful but gives only to get partial picture on shares transaction activity. Across 2003-2011, QCOM repurchased approximately 9-Billion-$ worth of shares. Average purchase-price (including expenses) would complete buyback side of this coin.

    Even more alarmingly, most companies avoid clarity and details on how they are "Issuing NEW shares, impacting/diluting shareholders" at much lower-prices. Investors are mostly left to find and connect the dots and calculate. This is the hidden/missing mirror companies avoid to clearly disclose to the shareholders.

    In sample case of QCOM, across 2003-2011, outstanding shares went UP from 1.62 B to 1.69 B ==> by good 70-million (even after spending 9-billion $)! Notice how carefully much needed and simplified info is excluded on issuance of "NEW" shares count and price (mix of options, M&A, employee purchase, etc).

    What should the fair-simple-and-full-disclosure mirror be?

    Publish similar yearly info-table & graphic of "Shares Issued, impacting/diluting shareholders"

    • Shares repurchased count, weighted average price (as repurchase $$ may be ~misleading and/or over-stating reduction in share count, depending on price)
    • Shares/Options vested/exercised count, weighted average price
    • Employee Purchase Plan shares issued count, weighted average price
    • M&A shares issued count, weighted average price

    Definitely management, employees and directors should be fairly rewarded but Billion-$ question how much and at how much discount...??

    Unfortunately QCOM has lot of company in tech (CSCO, INTC) as well as non-tech (PG, XOM, DVN, WAG) world too. I would hazard a guess that more than 80% of S&P500 companies do not fairly and clearly mention both buyback and issuance data an individual investors should know. But decide to avoid such info and expect/force investors estimate/assess comparative cost of buybacks and issuance. Not too surprising, I do not recall reading any Analyst notes that clearly mentions such either. They may have factored in but do not summarize/mention clearly their findings. All it takes is a small table and supporting paragraph/blurb.

    Of-course an enterprising and vigilant investor can always directionally identify/guess in matter of 20-min that company ABC is "more" trumpeting buybacks while "significantly more" diluting shareholders with low-priced issuance of NEW shares. That can be a days-consuming yet inaccurate exercise.

    So, Next time you read a share buyback auth/completion announcement from your portfolio company, do some FactDot-finding of your own (until companies disclose dilution activity info with equal clarity and simplicity). Your comments (with candid feedback) are welcome. If you find a good website that provides such clarity, do plug-in in comments.

    Happy Investing!!

    Disclosure: I am long PG, XOM, DVN, WAG, INTC.

    Additional disclosure: Reviewing QCOM

    Stocks: PG, XOM, WBA, INTC, QCOM
Back To VigilantJK's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.