ibm buyback

8/14/2019 IBM Buyback

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PRESENTED BY:

ABHIMANYU SINGH ASTHA CHATURVEDI

AMAL MOHAN DEEPTODIP SENSHUDHANSU KUMAR

SEMINAR FOR THE FINAL PROJECTFOR

FINANCIAL MANAGEMENT

STOCK REPURCHASE


2/13

"These stock repurchases are enabled by

IBMs strong, consistent cash flow andare an important way of returning valueto IBM shareholders. They are an elemenof our long-term roadmap for earnings pe

share growth through 2010 and alsorepresent a good value at today's prices.

-----

Samuel J Palmisano, chairman, president andchief executive officer, IBM


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Overview of the project

vObjectiveTo find the impact of repurchase of stocks by a

company.

vCompany chosen -IBM

v Event referred - repurchased $12.5 billion of itscommon stock in Feb 2008 .

vMethodology followed/ Area of study

Reasons of repurchase Need of repurchase Study of financial condition of the company before and

after the repurchase Implication


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INTRODUCTION

STOCK REPURCHASEA program by which a company buys back its ownshares from the market place, reducing thenumber of outstanding shares.

Reasons for repurchase To increase the market price of the share To improve financial ratios of the company i.e.

EPS, ROA, ROE etc

Availability of cash in excess To avoid dilution To acquire share for management and

employee incentive plan To generate currency for merger and

acquisition


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IBM- At a Glance NY based company started in 1896.

Big Blue-listed in 1916 for the first time inNYSE

Repurchase- A persistent phylosopy toretain the market value of its share.

Repurchase history

1998 negative buy back . 2007 positive buy back.


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Study on 2007 buy back.

vRepurchase 12.5 billion of itscommon stock.(8% of the common

stocks outstanding).vRepurchased through accelerated

share repurchase agreements with

three banks.vInitial price offered- $105.18 per

share; volume weighted average

rice at that time.


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Need for repurchase

vTo spend excess cash available.

vIBM expected the EPS to grow to13-

14%.vTo increases market price of their

shares.

vTo give good returns to the investors.


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Pre purchase and post purchasefinancial analysis


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Trend analysisv Dividend increases after a repurchase.

v Dividend also distribute the value to the share holders , since itincreases the market price.

Period ofbuybacksStock pricesshooting up


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Implications.Dividend distribution: Expected regular

dividends

vExpectation for higher dividends on regularbasis.

vFall in dividends: negative sign.

v Its burden on company

Stocks re purchase: One time distribution

vGenerally not expected by the investors.

vConsidered as a positive sign.


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Conclusions:There is a sign of improvement of ratioswhich helps build investors confidence.

The company has been able to keep its

growth rate in double digits (12% ineconomic downturn of 2008).

Even though the company has a history ofnegative buybacks also; buybacks has

worked well for the company and thestockholders as a whole.


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YOURYOUR


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ibm buyback

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