IBM Spent More on Stock Buybacks than its Market Capitalization

Vandana  |  Apr 22, 2020

IBM, the huge global tech company has noticeably spent more on the stock buybacks than its total market capitalization. The firm is failing towards boosting its market cap irrespective of its spending. It has been reported that IBM has spent a total of $140 billion on stock buybacks which is larger than its market capitalization. Its market cap has been recorded at $105 billion at the current time.

For the past few months, it has been seen that share buybacks have been facing some huge criticism. A lot of corporations were seen spending more on short-term rewards as compared to the long-term one.

Over the past 20 years, IBM has bought back $140 billion of its stock.

IBM demonstrates stock buybacks based on short-term planning 

Charlie Bilello, CEO of Compound Capital Advisor at IBM has clearly demonstrated how stock buybacks are somehow based on short-term planning. He has shown in his chart how the huge profit companies are aiming to perform better in the stock market.

It has been seen that IBM has bought back almost $140 billion stocks in the past twenty years. The current market capitalization of the firm has now reached down to $105 billion. Coronavirus pandemic is also contributing more towards this downfall. Several major banks are also seen taking some huge steps to prevent the stock buybacks.

The disconnect between the financial market and the real economy

Over the past two months, it has been seen that there has been a huge disconnect between the financial market and the real economy. It is quite clear that the U.S. financial market is seeing a huge level of unemployment particularly due to the COVID-19 pandemic. The financial sector could be seen as becoming very less representative as compared to the real economy.

Concerning the current scenario, it is quite unclear how the financial situation is going to be normal again. IBM is going through a huge uncertainty along with others who have bought their own shares.

Articles You May Read.

    Related News