A Breaking Down of Morgan Stanley’s Buyback Plans

Morgan Stanley's logo is displayed in white on a blue glass skyscraper.

Like all other companies, Morgan Stanley (NYSE: MS) also resorted to capital generation by selling shares. Investors are the biggest creditors of any company that, via purchasing shares, acquire ownership in the company along with other benefits, including dividends and equity increases. However, sometimes companies resort to purchasing back their previously sold shares due to attractive benefits. Morgan Stanley over a series of buyback programs planned to reacquire its shares, valued at almost $12 Billion.

Behind the Scenes

The prevalent pandemic situation has left banks with excessive capital reserves that not only will help them in hedging future recessions but also allow them to give excessive amounts as dividends. This year, the dividend payout ratio of several companies was appealing and far greater than what it was in the past three years. Morgan Stanley has come up with a successive plan that comprises 5 tranches in order to buy back shares. The company initiated this purchase plan in 2015 and by 2021, it plans to get back a total of shares worth $44 billion.

Breaking Down the Repurchases

Close monitoring of Morgan Stanley’s intentions revealed that in 2015, the company planned to procure back its shares at a total worth of $3.1 Billion. In 2016, the shares were valued at $3.5 Billion, in 2017, $5 Billion and so on. As per statistics, in 2019, the company intended to buy back $6 Billion worth of shares, in 2020, $10 Billion and the next year the figure reached an all-time high of $12 Billion. Although companies such as Morgan Stanley often prefer repurchasing outstanding shares such that it reduces equity financing, less ownership sharing and a temporary stock undervaluation can help in attaining additional benefits.

In a white background, a blue bar chart is depicting the company's earnings per share over the last six years.

Despite restrictions and strict policy impositions by the Fed, companies still prefer reacquiring shares. This time, Morgan Stanley and other investment companies with their burgeoned capital reserves and risk mitigation ability have convinced the regulator to waive off restrictions. As a result, increased intention to buy back shares, priced from $3.1 billion in 2015 to $12 billion in 2021 was witnessed.

Best for All

Buy Back shares is a win-win situation for all stakeholders. Where a company enjoys reattaining its outstanding shares, shareholders are delighted to get hard cash in return for their investment. Generally getting back shares takes place at a higher price than at what the shares were sold initially, hence the concept of equity gains is satisfied. With changing times policies change and so do businesses. For today, buying back shares is the ultimate plan, particularly in the midst of a global pandemic.

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