US Companies Defending Stock Prices Set Record High for Share Buybacks This Year

[Asia Economy New York=Special Correspondent Joselgina] U.S. companies have aggressively repurchased their own shares this year, recording the largest buyback scale ever. This is a result of more companies turning to share buybacks as a breakthrough to reassure investors after the New York stock market took a direct hit from concerns over monetary tightening and Russia's invasion of Ukraine since the beginning of the year.

According to Goldman Sachs on the 27th (local time), the scale of share buybacks by U.S. companies listed on the S&P 500 and Russell 3000 indices has reached approximately $319 billion (about 390.775 trillion KRW) this year. This is the largest scale ever and has significantly increased compared to $267 billion during the same period last year. Michael Boris, head of equity capital at Goldman Sachs, explained, "This is a level of buybacks we have never seen before," adding, "It is due more than anything else to the market environment."

Typically, share buybacks reduce the number of shares circulating in the market, which has the effect of boosting stock prices. Additionally, as the number of shares decreases, earnings per share (EPS) also rise. Apple repurchased and canceled over 100 trillion KRW worth of its own shares last year alone, during which its stock price rose to the $170 range.

As market volatility increased and warnings about economic growth slowdown continued this year, many U.S. companies have pulled out the share buyback card to reverse the depressed stock price sentiment. Last month, the S&P 500 index in the New York stock market plunged more than 10% from its previous high due to early tightening concerns by the Federal Reserve (Fed) and Ukraine risks, entering a so-called 'technical correction' phase. Although the S&P 500 has recently recovered some of its losses, the year-to-date decline still approaches 5%.

Announcements of share buybacks by major companies continue. Market experts expect these announcements to increase further starting next month when companies begin releasing their first-quarter earnings reports. Earlier this month, Amazon, the world's largest e-commerce company, announced a 20-for-1 stock split plan along with a $10 billion share buyback plan. U.S. semiconductor company AMD also recently disclosed a share buyback plan worth $8 billion.

The accelerated share repurchase (ASR) method, where investment banks buy shares, is also rapidly increasing. This method allows for large-scale purchases in less than a few months. Last week, ZipRecruiter announced an ASR worth $500 billion.

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