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Share Repurchases : Costly Smoke But Missing Mirror?

|Includes: INTC, The Procter & Gamble Company (PG), QCOM, WBA, XOM

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