13.08.2018 - Studies
Share buybacks are heading towards a new 10-year record. In 2018, 4.8 billion euros were used by the DAX and MDAX for stock buybacks; a further 5.7 billion euros have already been announced. Low interest rates, large cash holdings and low P/E ratios make buybacks appear more attractive.
When a company buys its own shares on the capital market, it uses liquidity to reduce the number of shares outstanding. It exchanges cash for a higher share price. The problem with this is that buybacks do not create any additional economic value. Liquid funds are spent, but no new assets are acquired for this purpose. The investor has only become richer on paper and does not have more cash in their pockets which they could reinvest, as is the case with a dividend.
It is therefore not surprising that share buybacks are more of a last resort. Only when no further investment opportunities and acquisitions arise; or the dividend is not increased in the short term; or there is no reason for early debt repayment and no excessive liquidity buffer is needed, do companies resort to the measure and buy back their own shares.
Please note: this study is only available in German.
09.07.2018 - Companies
18.06.2018 - Companies
The information contained and opinions expressed in this document reflect the views of the author at the time of publication and are subject to change without prior notice. Forward-looking statements reflect the judgement and future expectations of the author. The opinions and expectations found in this document may differ from estimations found in other documents of Flossbach von Storch AG. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. This document does not constitute an offer to sell, purchase or subscribe to securities or other assets. The information and estimates contained herein do not constitute investment advice or any other form of recommendation. All information has been compiled with care. However, no guarantee is given as to the accuracy and completeness of information and no liability is accepted. Past performance is not a reliable indicator of future performance. All authorial rights and other rights, titles and claims (including copyrights, brands, patents, intellectual property rights and other rights) to, for and from all the information in this publication are subject, without restriction, to the applicable provisions and property rights of the registered owners. You do not acquire any rights to the contents. Copyright for contents created and published by Flossbach von Storch AG remains solely with Flossbach von Storch AG. Such content may not be reproduced or used in full or in part without the written approval of Flossbach von Storch AG.
Reprinting or making the content publicly available – in particular by including it in third-party websites – together with reproduction on data storage devices of any kind requires the prior written consent of Flossbach von Storch AG.
© 2023 Flossbach von Storch. All rights reserved.