Cargotts Consulting LLC

Since 2010, over 60 percent of the 3,297 publicly traded non-financial U.S. companies have participated in share repurchase programs.  In the first quarter of 2016 alone, companies spent $165 billion on their share repurchase programs.  Unfortunately, not all companies engaged in share repurchase programs achieve their goals (which generally center around increasing stock prices).  The reasons for this underachievement vary, but according to McKinsey & Company, in many cases, transferring cash back to shareholders does not create any fundamental value, nor increase EPS the way many investors think it does.  Instead, when the market does respond favorably to share repurchases, it is most often because management is sending a positive signal (via the buyback) to investors.  Additionally, and more importantly, the share repurchase program removes available stock for purchase by investors (creating a liquidity effect), and simultaneously creates demand for the company’s shares.  It is the combination of these two effects that are most responsible for lifting share prices and it is those two effects that Cargotts Consulting LLC helps public companies manage, in order to stabilize and raise their share prices.