Capital Markets

P&G Buyback Tip of the Iceberg

Although the Procter & Gamble repurchase plan is big, it is just part of a trend that has boosted the overall market. Meanwhile, single-day slumps ...
Stephen TaubAugust 3, 2007

Procter & Gamble has announced that it will significantly boost its repurchase plans and buy back $24 billion to $30 billion of its shares in the next three years. The consumer-goods giant expects to purchase its own stock at a rate of $8 billion to $10 billion per year, which is an increase compared with the company’s fiscal 2007 repurchase level of $5.6 billion.

If the company does repurchase $30 billion worth of stock, the buyback would represent more than 15 percent of its current market capitalization of $198 billion. Chairman and CEO A.G. Lafley cited P&G’s strong cash generation and its confidence in the business outlook for its aggressive repurchase plans.

P&G’s announcement underscores the recent growing interest among companies of all sizes to buy back their shares, a trend that appears to be fueling the market’s overall rapid run-up. Further, consider that during the past few weeks, the stock market has experienced sharp one-day losses, which has also pushed several companies to announce buybacks as a way to bolster share prices.

In the first four days of last week, no fewer than 40 companies announced plans to buy back their stock, according to thestreet.com, which keeps score. The list includes such giants as Time Warner and Marriott International, as well as small companies like Gymboree Corp., which said it will repurchase $50 million worth of stock during a one-year period. On July 26 alone, when the Dow Jones Index dropped 312 points, 19 companies announced buybacks, 6 more than announced similar plans the previous day.

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