5 ms·

I do not believe share repurchase programs are done "on margin".

by eej71 8y ago

tcoppi 8y ago
If they borrow money to purchase the stock that's effectively what it is, a margin loan.
- eej71 8y ago
  Would be interesting to see some examples of this - and if so - what collateral if anything sits behind the loan?
  - matwood 8y ago
    Apple has done this multiple times because loan rates were/are cheaper than paying taxes to repatriate cash.
    - eej71 8y ago
      Ideally you have a reference to an EDGAR filing for this?
      - matwood 8y ago
        Google is your friend. There are many cases, but this is one of the more recent. https://www.bloomberg.com/news/articles/2017-09-05/apple-returns-to-debt-market-to-fund-share-buybacks-dividends https://www.bloomberg.com/news/articles/2017-09-05/apple-ret...
  - PopeDotNinja 8y ago
    I know less about shareholder buybacks than I do about divideds, but they are pretty similar to dividends. A buyback is returning $X in bigger chunks to a few shareholders, and a dividend it returning a $X to all shareholders. A dividend usually drops stock value in line with amount of dividend paid out, so in a sense you could think if it as the company saying "I'm buy 1% of your $100 share, so you get $1 and the share is now worth $99". Anytime a company pays a dividend AND increases their outstanding debt in the same time period, you could draw ths conclusion that they financed the dividend using debt. Check out the financials for Vector group... https://finance.yahoo.com/quote/VGR/financials?p=VGR https://finance.yahoo.com/quote/VGR/financials?p=VGR On the summary page you can see they pay about a 15% dividend. On their income statement you can see their net income is less than $100 million USD. On the balance sheet, you can see the long term debt has increased by a serveral hundred million over the last few years. That dividend sure sounds like it is financed by debt, although you'd have to dig into what is really going on to know for sure.
gomox 8y ago
If the buyback is funded with credit, it's done on margin. I'm not sure how prevalent that has been during the last bull run.
TheSoftwareGuy 8y ago
Nor does "reward shareholders" necessarily mean stick buybacks. It could just as easily refer to paying out dividends.
- stevehawk 8y ago
  ^-- This right here. This article is from 2012 but illustrates the point (it's also why I left the company, they restructured debt, issued a dividend which, even though they're publicly traded they were(are?) 75% held by Carlysle Group so it was basically a self bonus, then cut employee benefits) https://www.forbes.com/sites/abrambrown/2012/07/11/booz-allen-mulling-1-billion-special-dividend/#573f37f427af https://www.forbes.com/sites/abrambrown/2012/07/11/booz-alle...
gruez 8y ago
considering money is fungible, you could make the case that any buyback done close to a loan could be construed as being "on margin"

I do not believe share repurchase programs are done "on margin".

by eej71 8y ago

I do not believe share repurchase programs are done "on margin".

tcoppi 8y ago

If they borrow money to purchase the stock that's effectively what it is, a margin loan.

eej71 8y ago
Would be interesting to see some examples of this - and if so - what collateral if anything sits behind the loan?
- matwood 8y ago
  Apple has done this multiple times because loan rates were/are cheaper than paying taxes to repatriate cash.
  - eej71 8y ago
    Ideally you have a reference to an EDGAR filing for this?
    - matwood 8y ago
      Google is your friend. There are many cases, but this is one of the more recent. https://www.bloomberg.com/news/articles/2017-09-05/apple-returns-to-debt-market-to-fund-share-buybacks-dividends https://www.bloomberg.com/news/articles/2017-09-05/apple-ret...
- PopeDotNinja 8y ago
  I know less about shareholder buybacks than I do about divideds, but they are pretty similar to dividends. A buyback is returning $X in bigger chunks to a few shareholders, and a dividend it returning a $X to all shareholders. A dividend usually drops stock value in line with amount of dividend paid out, so in a sense you could think if it as the company saying "I'm buy 1% of your $100 share, so you get $1 and the share is now worth $99". Anytime a company pays a dividend AND increases their outstanding debt in the same time period, you could draw ths conclusion that they financed the dividend using debt. Check out the financials for Vector group... https://finance.yahoo.com/quote/VGR/financials?p=VGR https://finance.yahoo.com/quote/VGR/financials?p=VGR On the summary page you can see they pay about a 15% dividend. On their income statement you can see their net income is less than $100 million USD. On the balance sheet, you can see the long term debt has increased by a serveral hundred million over the last few years. That dividend sure sounds like it is financed by debt, although you'd have to dig into what is really going on to know for sure.

gomox 8y ago

If the buyback is funded with credit, it's done on margin. I'm not sure how prevalent that has been during the last bull run.

TheSoftwareGuy 8y ago

Nor does "reward shareholders" necessarily mean stick buybacks. It could just as easily refer to paying out dividends.

stevehawk 8y ago
^-- This right here. This article is from 2012 but illustrates the point (it's also why I left the company, they restructured debt, issued a dividend which, even though they're publicly traded they were(are?) 75% held by Carlysle Group so it was basically a self bonus, then cut employee benefits) https://www.forbes.com/sites/abrambrown/2012/07/11/booz-allen-mulling-1-billion-special-dividend/#573f37f427af https://www.forbes.com/sites/abrambrown/2012/07/11/booz-alle...

gruez 8y ago

considering money is fungible, you could make the case that any buyback done close to a loan could be construed as being "on margin"