7/29/16

Why is Samsung spending $10 billion to buyback its own shares?

Samsung announced a share buyback program worth $9.9 billion last year. It said that the program will be implemented in stages and would be completed in one year, it will be cancelling all shares purchased in the buyback. It has completed three phases and repurchased 5.63 million common and 2.09 million preferred shares all of which have been cancelled. Samsung has now embarked on the fourth and final phase of the share buyback program which will see the company repurchasing and cancelling 990,000 common shares and 230,000 preferred shares.

Buyback programs are just some of the ways public companies can return money to shareholders. The company essentially pays them cash to purchase their equity, it can either keep the repurchased shares as treasury stock which can be reissued in the future or awarded to employees, or the company can choose to retire those shares and they will cease to have any financial value. Samsung is doing the latter.

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