U.S. companies buy back stock in droves as they hold record levels of cash
By Jia Lynn Yang
Washington Post Staff Writer
Thursday, October 7, 2010; 12:04 AM
Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves.
For months, companies have been sitting on the sidelines with record piles of cash, too nervous to spend. Now they’re starting to deploy some of that money - not to hire workers or build factories, but to prop up their share prices.
Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates, a stock market research firm. But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth.
Some companies are buying back shares partly because they don’t want to invest in developing new products or services while consumer demand remains weak, analysts said.
“They don’t know what they want to do with all the cash they’re sitting on,” said Zachary Karabell, president of RiverTwice Research.