SEMINAR FOR THE FINAL PROJECT

FOR
FINANCIAL MANAGEMENT

STOCK REPURCHASE

PRESENTED BY:

ABHIMANYU SINGH ASTHA CHATURVEDI

AMAL MOHAN DEEPTODIP SEN
SHUDHANSU KUMAR
"These stock repurchases are enabled by
IBM’s strong, consistent cash flow and
are an important way of returning value
to IBM shareholders. They are an element
of our long-term roadmap for earnings per
share growth through 2010 and also
represent a good value at today's prices.”
-----
Samuel J Palmisano, chairman, president and
chief executive officer, IBM
Overview of the project
v Objective
To find the impact of repurchase of stocks by a
company.

v Company chosen -IBM

v Event referred - repurchased $12.5 billion of its

common stock in Feb 2008 .

v Methodology followed/ Area of study

• Reasons of repurchase
• Need of repurchase
• Study of financial condition of the company before and
after the repurchase
• Implication
INTRODUCTION

• STOCK REPURCHASE
A program by which a company buys back its own
shares from the market place, reducing the
number of outstanding shares.

• Reasons for repurchase

• To increase the market price of the share
• To improve financial ratios of the company i.e.
EPS, ROA, ROE etc
• Availability of cash in excess
• To avoid dilution
• To acquire share for management and
employee incentive plan
• To generate currency for merger and
acquisition
IBM- At a Glance
• NY based company started in 1896.
• Big Blue-listed in 1916 for the first time in
NYSE
• Repurchase- A persistent phylosopy to
retain the market value of its share.
• Repurchase history
• 1998 negative buy back .
• 2007 positive buy back.
Study on 2007 buy back….
vRepurchase 12.5 billion of its
common stock.(8% of the common
stocks outstanding).
vRepurchased through accelerated
share repurchase agreements with
three banks.
vInitial price offered- $105.18 per
share; volume weighted average
price at that time.
Need for repurchase
vTo spend excess cash available.
vIBM expected the EPS to grow to13-
14%.
vTo increases market price of their
shares.
vTo give good returns to the investors.
Pre purchase and post purchase
financial analysis
Trend analysis
v Dividend increases after a repurchase.
v Dividend also distribute the value to the share holders , since it
increases the market price.

Period of
buybacks—
Stock prices
shooting up
Implications….
Dividend distribution: “Expected regular
dividends”

v Expectation for higher dividends on regular

basis.
v Fall in dividends: negative sign.
v Its burden on company

Stocks re purchase: “ One time distribution”

v Generally not expected by the investors.

v Considered as a positive sign.
Conclusions:
There is a sign of improvement of ratios
which helps build investors confidence.
The company has been able to keep its
growth rate in double digits (12% in
economic downturn of 2008).
Even though the company has a history of
negative buybacks also; buybacks has
worked well for the company and the
stockholders as a whole.
 YOUR
QUERIES