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Simon Huang · · 4 min readAsia tech firms go big on buybacks, but outcomes are mixed
US$1 trillion. That’s how much Apple, Alphabet, Microsoft, and Meta have collectively spent on buying back their shares since 2013.
Photo credit: GoTo Group and Shutterstock
The buyback bonanza has been embraced by other tech platforms, too, including Uber, which announced a US$7 billion share buyback in February, and Airbnb, which launched a similar US$6 billion plan the same month.
Fairly recently, Asian tech companies are getting in on the game as well, with Grab and GoTo announcing their first share buyback programs in February and March respectively.
See also: Why Grab’s shares declined despite its ‘strong’ Q4 results
Why buybacks?
A share buyback is one way companies can return capital to shareholders (the other being through dividends).
By reducing the number of outstanding shares, buybacks increase a company’s earnings per share in the hopes that it also sends up the value of the stock.
Investors, however, should be mindful that buybacks do not always guarantee a lower share count. Many tech companies concurrently operate employee stock ownership plans that compensate staff with share options or restricted share units. This has the effect of increasing the company’s outstanding stock.
For example, even though Meituan repurchased and retired 44 million shares worth HK$3.2 billion (US$410 million) in January, it granted another 60 million units to employees in April.
Photo credit: Shutterstock
That said, buybacks can sometimes still result in a net reduction of outstanding shares. Alibaba, for instance, estimates that as a result of its buybacks in the fourth quarter of 2023, there was a net decrease of 3.3% in its outstanding shares that year, even after accounting for those issued to employees.
Buyback programs are also a signal that management is confident that the business has enough cash in the bank to cushion any emergencies and may also signal its belief that its shares are currently undervalued.
Other factors more important
All else being equal, buybacks should have a positive impact on a business’ share price.
No link to revenue growth
Not a silver bullet
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Our sample of twelve Asian tech companies suggests that, over the past six months, those that did not announce buybacks outperformed those who did.
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