So the Home Depot (HD) made a splash this afternoon with the announced $22.5 billion buyback. But they failed to answer one little question… when?
The board of directors authorized a $22.5 billion increase in its share repurchase program and stated their intent to repurchase up to $22.5 billion in shares as soon as practicable. It will be funded with the proceeds from the sale of HD Supply, existing cash on hand and proceeds from an anticipated $12 billion issuance of senior unsecured notes. The $22.5 billion share repurchase may be in the form of a tender offer, open market repurchases or accelerated share repurchases, the details of which will be announced at a later date.
“Our planned recapitalization is transformational for our company. While we continue to invest heavily in the five priorities focused on our core retail business, this recapitalization plan allows us to return significant capital to our shareholders, improve the efficiency of our balance sheet by lowering our cost of capital, while at the same time retaining strong financial and operational flexibility,” said Carol Tome, CFO and executive vice president – Corporate Services.
“As soon as practicable?” When is that? 3 years? 13? Stuff like this drives me crazy, if you are going to announce something that big so you make headlines, give us some sort of time frame. The time frame of the buybacks is the only thing that really matters when it comes to their impact. Over the next decade I would expect them to come close to that amount, if they are going to do it in the next 3, that is something entirely different.
Details boys… details….
6 replies on “Home Depot Buyback: Great, But, When?”
Isn’t it typical for a buyback announcement to not have a timetable? I always figured that is why managers like buybacks to dividends. Dividends are more commital – you announce a dividend you had better do it. But a share repurchase its like, well whenever. And we may or may not actually do it. In fact, I seem to recall a study that showed that most share repurchase programs actually never are completed.
andy,
here is how to announce a buyback http://www.cfo.com/article.cfm/8723999/c_8722312?f=TodayInFinance_Inside
while they do not specify dates, most do give parameters (at least the ones that are not just a press release)
buybacks do give managers more flexibility and do rise the stock price, helping their option values. many are never completed but like anything else, if you do DD, you can anticipate the outcome with a certain degree of accuracy.
Todd,
This is a very highly cited paper in the academic literature you may be interested to read.
http://www.business.uiuc.edu/weisbach/stephensweisbach.pdf
left off the extension, here it is:
http://www.business.uiuc.edu/weisbach/stephensweisbach.pdf
andy,
I will read it. thank you.
I think we are kind of saying the same thing? We are skeptical about this announcement?
Yeah, definitely. My point is that just that you should be skeptical about all repurchase programs. From what I know about firm payout policy (and about how shady HD has been lately) this just seems kind of excessive – $22 billion? Seriously. HD is using it to move their stock, and look what happened, it jumped 5% on the news…