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Stock buybacks for U.S. firms are expected to reach a record $1.25 trillion this year. Beyond a temporary spike related to accelerated repurchases to beat the 1% tax on buybacks that kicks in next year, buyback growth is likely to slow down in the near future because of declining earnings growth and shrinking cash balances. At the very time companies should be considering increasing their buybacks, they are likely to pull back. A great example of this is technology companies that have reported disappointing Q3 results. Facebook’s parent company, Meta Platforms (META) lost more than 70% of its value YTD as its stock fell from a high of over $341 to below $100. Meta announced two buybacks last year, in January 2021 and October 2021, totaling $75 billion. Its last buyback of $50 billion was announced when the stock was trading at $328.69. It is interesting to note that Meta has not announced any buybacks this October although its price dropped significantly. We are also yet to see any insider purchases at Meta. During the past year, Meta has repurchased $42 billion of stock at an average price of $300.
On the other hand, energy majors have made significant buyback announcements this year. TotalEnergies SE (TTE), announced a share buyback of up to $2 billion in the third quarter while Shell Plc (SHEL) intends to repurchase another $4 billion of shares over the next three months, bringing the total repurchases for the year to $18.5 billion. BP p.l.c (BP) also announced a $2.5 billion share repurchase this week representing around 3% of its market cap at announcement. Energy companies are investing in production increases but they are also returning cash to shareholders after several difficult years that saw a large number of smaller energy companies go bankrupt.