Facebook (NASDAQ:FB) just announced a monster US$50 billion share buyback program

What’s in a buyback?

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A happy woman looks at her mobile phone and fist pumps, indicating a share price rise

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The Facebook Inc (NASDAQ: FB) stock price had a pretty decent day of trading over on Monday’s trading session on the US markets. This morning (our time) Facebook shares closed at US$328.69, up 1.26% for the day. In after-hours trading, it was even better, with the social media giant rising a further 1.05% to US$332.15.

That last rise follows the release of Facebook’s earnings report for the quarter ending 30 September (Q3) after US market close this morning.

Facebook announced some healthy increases in revenue, and net income (up 35% and 17% year-on-year respectively). But the company also discussed its monster share buyback program.

Facebook stated that over the quarter just passed, the company “repurchased [US]$14.37 billion of our Class A common stock in the third quarter and had [US]$7.97 billion remaining on our prior share repurchase authorization as of September 30, 2021”.

Not only that, Facebook also stated that “we also announced today a [US]$50 billion increase in our share repurchase authorization”.

Facebook announces another US$50 billion in share buybacks

That’s not an insignificant number. Facebook has a total market capitalisation of US$926.72 billion at its last closing share price. With the US$22.34 billion in allocated and executed buybacks, along with the new US$50 billion just authorised, Facebook will be buying back roughly US$72.34 billion of its own stock. That’s the equivalent of 7.8% of its total market capitalisation – a major boon to investors.

Why is this buyback so good for shareholders?

A share buyback program usually sees the company in question purchase its own shares on the market. The shares are then ‘retired’. While this costs money, it also removes these shares from circulation.

Fewer shares outstanding means that existing shareholders are entitled to a larger cut of the company’s profits. That’s because there are fewer shares to divide the spoils between. It also means that all investors will own a greater percentage of Facebook when the buyback program is complete, than they do today.

Facebook doesn’t pay a dividend. But a share buyback program is an alternative method of returning capital to shareholders. It’s particularly popular with US companies, whose shareholders don’t enjoy the same franking benefits from dividends as we ASX investors do.

So it’s perhaps no surprise that the Facebook stock price has lifted in after-hours trading following the release of this earnings report. After all, its shareholders can look forward to owning roughly 7.8% more of this company when the buyback is completed.


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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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