The Strategist

US companies allocate record funds to buybacks

05/13/2021 - 03:43

According to the Financial Times (FT), citing Goldman Sachs calculations, in the first four months of the year US companies announced a total of $484bn to buy back their shares from the market. This is a record for this period in the last 20 years.

Goldman Sachs expects that by the end of the current year the volume of buybacks in the USA will grow by 35% compared to 2020. Analysts attribute this situation to a significant amount of free funds that companies have received at the end of last year and the beginning of this year due to the economic recovery and government stimulus measures from the U.S. government. Companies intend to use these funds, among other things, to support their shares by means of buybacks.

"The companies now have a good situation with available funds, said Howard Silverblatt, senior analyst at S&P Dow Jones Indices. - Only recently, companies had to consider thousands of possible scenarios, and now - hundreds, which is somewhat easier.

Technology companies are among the leaders in terms of volume. For example, Apple and Alphabet have already allocated $90bn and $50bn for buybacks this year. Among European companies, the growth rate of buybacks is not as high as in the US. Nevertheless, Societe Generale estimates that European companies could allocate 25% more funds for share buybacks this year than before the pandemic.