Capital Markets

Big Blue Bolsters Buyback Boom

First quarter buybacks totaled about $110 billion, says S&P. Meanwhile, Biogen and IBM do their part to keep the boom going this quarter.
Stephen TaubMay 30, 2007

Another day, another couple of large share buybacks.

Biogen said Wednesday it would begin buying $3 billion of its shares, which works out to about 16 percent of its total market capitalization. And, as has reported, IBM announced it repurchased $12.5 billion of its common stock using accelerated share repurchase agreements.

These are not isolated events. Standard & Poor’s tells that buybacks in the first quarter probably amounted to around $110 billion, making it the second highest quarterly total. It also tops the fourth quarter of 2006, when buybacks hit $105 billion. The first quarter of 2007 also marked the sixth consecutive quarter that buybacks topped $100 billion.

“It’s strong in the second quarter as well,” says Howard Silverblatt, senior index analyst with S&P. In 2006, he notes, S&P 500 companies spent more on buybacks— 432 billion— than the government spent on Medicare ($408 billion).

And companies are still sitting on plenty of cash to repurchase more of their shares. S&P calculates that industrial companies that compromise the S&P 500 Index currently have $598 billion in cash.

The buyback binge has had a big impact on overall liquidity. Since the surge got underway in the fourth quarter of 2004, 7.7 percent of the S&P 500’s capitalization has been retired, and there is little sign of the trend abating.