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Question on buyback & Shares outstanding..


Gopinath
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Hi,

 

I have a question & I have been scratching my head to find an answer. I believe some of you can answer.. Take a company like Gaps(gps), they spent about $11B in buying back shares since 2005. But they only reduced 40% of outstanding shares(350M). The share prices only averaged around $20/share in last 8 years. By simple math, 11B will buy about 550M shares at an average $20/share. So, it means the company issued around 200M shares in 8 years?

 

I would appreciate if someone can clarify my understanding. I pulled the above data from Morningstar. Thanks!

 

Gopi

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Hi Gopi,

 

Go to the 10-K for each year and see how much was spent on retiring shares, and how much was spent issuing shares, including through options and warrants.  If a corporation spends plenty of money buying back shares, but either pays too much for those shares or issues as many shares through grants, then it really isn't getting anywhere.  Not sure if that was the case with the Gap, but the filings will give you the correct numbers.  Cheers! 

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