Buy back of shares is not the phenomenon of only India. Globally its picking up in the Cash rich companies. Sony is another such large company to follow the global trend of returning money to investors.
Sony Corporation announced its plans to buyback shares worth 100 billion yen ($910 million). This is one of the largest ever buyback of the company. The buy back plan is expected to be executed on 22.03.2019.
This repurchase of stock makes up 2.4 per cent of the stock. Earlier, Japanese telecoms and technology giant SoftBank Group Corporation announced a 600 billion yen buyback.
Sony has been seeking to strength its financial footing under Chief Executive Officer Kenichiro Yoshida, who was promoted from chief financial officer last year. Last week, Sony reported weaker profits in the PlayStation business and cut its annual revenue forecast, triggering the steepest share drop in almost three and a half years. One of the objectives of the repurchase plans is to support the prices of falling shares.
The company was perturbed by the steep stock decline. Repurchase sends a strong signal to its investors that company is watching the stock price. Since the cash flow of the company is strong they have the financial resources to carry this out. It is important to note that Sony’s stock had declined 14 per cent over the week, to its lowest since October 2017.
The Tokyo-based company last bought 6.3 billion yen worth of its own stock in 2004, related to its decision to fully merge PlayStation subsidiary Sony Computer Entertainment into the parent company.
After the companies grow beyond certain size it becomes difficult for the companies to impress the shareholders with their performance or acquisitions. Excessive cash starts affecting the Return on Investments. In such cases its always a good idea to buy the shares back from the investors. Sony’s results underscore the struggle at big technology companies, which are seeing slowing demand for their products and services. Apple Inc. reported a decline in revenue for the first time in two years, while chipmaker’s Intel Corp. and Nvidia Corp. have warned of weaker sales as Chinas economy starts to sputter and looming uncertainly over Brexit.