Listings eXchange

by Listings Europe

Optimizing a Market Listing with Share Buybacks

Share buyback programs are increasingly common in Europe and the United States over the past few years. The benefits are tangible for both issuers and investors, in the short and medium term.

Whether for ad hoc programs launched under conditions set by national legislatures, or public buyback offerings, the rising popularity of share buybacks is a clear indication that issuers see it as a valid option in downward-trending markets.

"These share buybacks can serve different purposes," explains François Houssin, Head of Client Coverage for NYSE Euronext in France. "Some companies want to show the market that investing in their shares is very profitable in the short term. Other issuers want to gain leverage for completing external growth operations, at a time when access to credit financing is increasingly restricted. The goal can also be to motivate employees by offering employee shareholder plans, or to stabilize the market price in situations of high volatility. Finally, when major shareholders have a large share in a company's capital, share buyback and cancellation can be a tool for owners to strengthen their participation and prevent hostile takeover attempts."

Issuers optimize their market presence

These advantages are well-known and appeal to a growing number of large groups. In Europe, GDF-Suez (€500 million share buyback), Vinci (€2 billion share buyback in 2010 and 2011) or Bouygues (ongoing €1.25 million public offer)have launched share buyback programs. In the United States, Dell implemented a $5 billion program to follow on a previous operation that led to the buyback of the equivalent of $2 billion in shares.

"In the current environment, companies have liquidity," adds Mr. Houssin."Even if share buyback offers don't constitute a long-term strategy, they do provide solutions today that allow issuers to carry out excellent financial operations and optimize their market presence. Our role is to support them in these efforts by giving them all the information they need. In the case of public offerings of share buybacks for issuers specifically listed on Euronext Paris or NYSE Alternext Paris, we take care of centralizing the operation."

"In the current environment, companies have liquidity," adds Mr. Houssin."Even if share buyback offers don't constitute a long-term strategy, they do provide solutions today that allow issuers to carry out excellent financial operations and optimize their market presence. Our role is to support them in these efforts by giving them all the information they need. In the case of public offerings of share buybacks for issuers specifically listed on Euronext Paris or NYSE Alternext Paris, we take care of centralizing the operation."