Posts Tagged ‘Equity’

U.S. Companies Buying Stock… In Their Own Companies

Thursday, October 7th, 2010

It’s an easy way to make your shares look better, but is it the kind of long-term investment companies need?

  • Companies these days have a lot of cash on hand. Because of the recession, they’ve been scared to spend too freely and risk losing more money. So they’re doing something kind of unusual: they’re buying back stock they’ve sold to investors.
  • Buying up lots of your own company’s shares makes your stock look better to investors because of a statistic called earnings per share. If you reduce the number of total shares available to the public (by buying them back), you make that number go up.
  • Spending cash on shares means not investing in company infrastructure or workforce. Some people say it’s a bad long-term strategy because it’s based on short-term gains, not long-term growth.

Facts & Figures

  • Firms plan to buy back $273 billion of their own shares this year.
  • According to the Federal Reserve, companies (excluding financial firms) held $1.8 trillion in cash and other short-term assets as of June 2010.
  • Some of the companies buying back large amounts of their own stock include Hewlett-Packard, Pepsico, and The Washington Post Co.

Best Quote

“It’s totally wasted money. It does not do anything long-term for companies.” – William Lazonick, Professor and Director of the Center for Industrial Competitiveness at University of MA at Lowell

An Oil Company Actually Benefits From The Oil Spill

Wednesday, June 16th, 2010
While most oil companies are suffering in the wake of the big spill, investors are becoming more confident in Brazil’s Petrobras because it doesn’t operate in the Gulf of Mexico.
  • As BP shares continue to fall, shares of Brazilian oil company Petrobras have remained stable for weeks.
  • Petrobras plans to make more stock available for sale later this summer, indicating that it’s doing well despite other oil companies suffering from the oil spill.
  • While the oil spill is hurting stocks associated with the Gulf, investors are confident that oil companies elsewhere (like Petrobras) could actually benefit.

Facts and Figures

  • Petrobras plans to offer $25 billion in equity this summer
  • If they do sell all of their offered stock, it would be the second largest equity offering ever
  • Petrobras operates worldwide – from Turkey to New Zealand to, of course, Brazil

Best Quote

“Petrobras does not have the headline risk that BP does right now. Investors are unlikely to move away completely from the oil sector but substitute from one company to another.” – Gerry Sparrow, Chief Investment Officer, Sparrow Capital

Private Equity is…

Thursday, June 11th, 2009

Private equity is that part of a company or shareholder’s assets that are not traded publicly. Since you cannot buy or sell these assets on a stock exchange, you have to find a buyer in some other way.

Equity is…

Wednesday, June 10th, 2009

Equity is Wall Street talk for “stock.” It can also refer to the value of things or properties you own outright. For example, you own equity in your new bike, your recently purchased car, or your developing intellect when you go to school.