Shareholder buybacks are proving to be yet another casualty of high interest rates, with the value of global buybacks slumping this year, according to S&P Global Market Intelligence.
The rating agency reported that the aggregate value of shareholder buybacks on the world’s major exchanges is down 35% year over year to US$163.5 billion through Sept. 9.
“Global share buybacks are headed toward their lowest annual value since 2020, a sign that companies’ cash flows could be hindered by the highest interest rates in decades and a looming global economic slowdown,” S&P said.
By comparison, at the height of the pandemic in 2020, buybacks reached US$178.5 billion through the first eight months of the year.
Buyback activity has fallen particularly sharply in the U.S., with US$104.6 billion in buybacks through the first eight months of the year, compared with US$201 billion in the same period of 2023.
“The slowdown in U.S. repurchase activity seems to be fairly recent,” S&P said. While there were US$65.2-billion worth of buybacks in the first four months of the year, that slowed to US$39.4 billion in the next four months.
“Buybacks in the U.S. are cooling as the S&P 500’s price-to-earnings ratio has remained above the 10-year average for the entire year so far,” it said.
Despite the decline in the value of global buybacks, the number of companies engaged in these transactions is up, with 983 global buybacks so far this year compared with 823 transactions during the same period of 2023.