Yahoo increases share buyback by $5 billion, puts $1 billion in debt on the table

Yahoo increases share buyback by $5 billion, puts $1 billion in debt on the table

Summary: In order to raise the price and value of remaining shares, Yahoo has added $5bn to its stock buyback program.

TOPICS: Tech Industry

Yahoo plans to sell $1 billion in convertible notes to use the funds to buy back additional shares.

The tech giant's sale will take place privately, according to the Associated Press. In addition, by adding $5 billion to its stock buyback program, Yahoo hopes the purchase will increase the value of its remaining shares.

The Sunnyvale, Calif., company spent $3.1 billion buying back 123 million shares this year. In order to raise the funds necessary to buy back shares, the tech giant sold a portion of its stake in Chinese e-commerce giant Alibaba. The repurchase boosted Yahoo's shares by over 70 percent this year, which has assisted the firm in the race to stay competitive against other Internet-based firms including Google -- while the company, under Marissa Mayer's leadership, continues to rapidly reinvent its online products in a bid to stay relevant. 

Against its competitors, growth patterns have begun to stagnate -- but the share program may be able to help revive the company's growth. Yahoo says the notes will be due in 2018, and interest will be payable semi-annually in arrears from June 1 next year.

Separately, at Dreamforce yesterday, an interview between Salesforce CEO Marc Benioff and Yahoo CEO Marissa Mayer was disrupted due to protests. However, the CEO did manage to reveal that a head of design is due to be hired in order to make the firm's products more appealing to the general public.

Topic: Tech Industry

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  • Does Yahoo actually have the money for that?

    If the profits are rolling in and Yahoo can afford to buy back shares with cash, then by all means; but I don't think it makes any sense at all to do it with borrowed money.

    Apparently, Yahoo is doing better than it was, but I don't think things are going well enough to justify a stock buyback.
    John L. Ries
    • So the question arises...

      ...why is Yahoo trying to inflate the price of its stock by buying back shares? Clearly it's not so Yahoo can raise capital by selling shares. The other possibilities are:

      1. Public relations. But only investors are going to care much about the stock price, and they're going to be a lot more impressed by good products, efficient operation, and a solid business plan. Users care about the quality of the services. Advertisers (Yahoo's real customers) care about eyeballs.

      2. Hostile takeover prevention. I'm sure Mrs. Meyer *really* doesn't want a repeat of the MS buyout fiasco, so this is probably it.

      But even so, I think chances are good that Yahoo has much better uses for its limited credit (like fixing Mail and maybe buying MS' share of Bing).
      John L. Ries
      • I doubt MS would be interested in selling Bing

        if that's the way of the future as so many want to claim (every time they bring up Google) S would be taking a huge step backwards for money it really doesn't need