MorningWord 10112 Stealing From Peter To Pay Paul

MorningWord10/1/12?

WhenpreviewingNKEsQ3earningsreportlastweekwementionedthatwethoughtitwascuriousthatthecompany,theweekbeforetheirreport,announcedasharerepurchaseprogramof$8billion,doublethepreviousone?

Iambynomeansanexpertincorporategovernance,butfromapurely?

anecdotal?

standpoint,Iwouldhavetoguessthata?

disproportionate?

amountofthesesortsofannouncementsdonotcomeoutwhilethecompanyisinitsquietperiod,essentiallyclosingthebooksforthequarter?

Conspiracytheoriesaside,theStockopenedupnearly3%ontheannouncementonSept19th,onlynowtosit5。

5%lowerfromthosehighs?

Whilethecompanyintendstobuyalotofshares,investorsusedtheenthusiasmtosell。

NKE10DayChartfromBloomberg

Overtheweekendtherewasan?

articleintheWSJsuggesting,BewareAllThoseBuybacks?

Nothing?

particularly?

earth-shattering,butagoodreminderthatwhilethemechanicsofbuybacksareusuallyinshareholdersbestinterests,manycorporationsusetheir?

corporate?

cofferstomanageearnings,whichcomparedtodividendsislikelytobeafarlessattractiveapproachto?

returning?

cashtoshareholders。

Hereareafewquickhighlights:

-Duringthesecondquarterof2012,companiesintheStandardPoors500-stockindexrepurchasednearly$112billionoftheirownshares,up32。

6%fromthepreviousquarter

-investorshavetomakesurethatisactuallyhappening。

Manycompaniesbuybacksharespurelytooffsettheissuanceofnewonesaspartofcompensationpackages,saysAndrewLapthorne,headofquantitativeanalysisatSociétéGénérale。

-OnJuly18,forexampleEBAY?

reportedithadboughtback$355millionofstockduringthesecondquarterandwouldrepurchase$2billionadditionalshares。

Theprimaryobjective,thecompanysaid,wastooffsettheadditionalsharesbeingissuedascompensation。

-Onaverage,buybackshaventbeenagreatwaytoboostshareholdervalue,saysDavidZion,anaccountinganalystatCreditSuisse?

From2004,whencompaniesfirstwererequiredtodisclosemonthlysharerepurchases,throughtheendof2011,31%ofSP500companieshaveseenthevalueofthosesharesfall,Mr。

Zionsays。

Andjust36%havereturnedmorethan7%。

InEnissQ3previewofAZOonSept18th,hehighlightedthecompanyshistoryofbuyingbacktheirstock,usingmostifnotalloftheiroperatingfreecashflowtodoso,whilealsoraisingdebttobuybacktheirstocksince2007?

Thestockhasbeenamonstersincethelowsin2008,upalmost300%inthattimeperiod,andwithatinyfloat,shortinterestatabout4%,awhoswhooflongonlyinvestors,plussomefamedactivisthedgefunds,thisstockseemedlikeitwasbuiltforthesesortofcorporateshenanigans。

Makenomistakeaboutit,youdratherownstocks,wherethecompanyseesthesamevalueatcurrentlevelsthatyoudo,butaswasthecasewithEBAYmentionedabove,andFBs?

announcement?

todothesametooffset?

additional?

sharestobeofferedforfutureemployeecompensationisjustasimplecorporateshellguy,stealingfromPetertoPayPaulsotospeak。