Company / Analytics

Analytics, 05 May 2023

HSBC and BP Announce Share Buyback Plans

Big companies including HSBC and BP have engaged in massive share buybacks recently.

On Wednesday, HSBC initiated its intended $1 billion share buyback in an effort to reallocate surplus capital and compensate its shareholders. To facilitate the process, the worldwide lender listed in London has selected Merrill Lynch International to manage it. The program has the potential to eliminate up to 2 billion HSBC ordinary shares, which is anticipated to result in an improvement in the average earnings per share. HSBC has indicated that Merrill Lynch will conduct trading activities relating to the buyback autonomously from HSBC and will buy shares “on exchange.”

In the same vein, BP has announced that it exceeded profit expectations and plans to buy back up to US$1.75 billion in shares.

Is it good or bad for investors? Let’s discuss in this article.

What is a share buyback?

A share buyback, also known as a stock buyback or share repurchase, is when a company uses its own money to buy back some of its shares from the open market. This reduces the number of outstanding shares in circulation.

Top Reasons Why Share Buybacks Appeal to Investors Like Warren Buffet

Why Investors Might Not Always Favor a Stock Repurchase

Investors might not be in favour of a stock repurchase. Take BP’s example Despite the better-than-expected profit results, the company’s share price fell, possibly due to disappointment from investors over the size of the share buyback.

That may be because there are currently calls for the energy giant to pay higher windfall taxes, which may put additional pressure on the company to manage cash flow and balance competing priorities.

Other reasons why a buyback might not be efficient


In summary, share buybacks can be a way for companies to reward shareholders and signal confidence in the company’s prospects. They can also be used to improve financial ratios and offset dilution. However, investors should be aware of potential risks, such as overpaying for shares, reducing dividends, and artificially boosting EPS

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