As our own Matt Posky pointed out earlier today, automakers certainly seem to put shareholders ahead of consumers with far too many decisions — is General Motors the latest?
As part of its third quarter earnings announcement Monday, the Detroit-based auto company revealed plans for a $20 billion multiyear share repurchase program. The move comes after GM completed a $6 billion share repurchase program in January, plus it repurchased $5.3 billion of its own shares and an additional $1 billion in October, the company noted.
So it begs the question: Why?
“We believe the company’s undervalued. We think this is the best way to bring value to our shareholders,” Barra said on a call with investors on Oct. 20. “It reflects our board’s commitment to return cash to shareholders because the shares are undervalued.”
Dan Ives, partner and senior managing director at New York-based investment banking firm Yorkville Ives, told the Detroit Free Press that he considers the share buyback strategy a sensible one while the stock remains cheap.
Barra and GM are taking a page out of the Apple playbook on buybacks and it makes a ton of sense in our view. The stock is cheap and not being valued fairly by investors,” he said. “Bulls (investors) like to see the confidence.”
GM trades in the $77 range while Toyota trades around $196 a share. Is GM as valuable to you as Toyota or is this a waste of $20 billion? Let us know.
[Images: General Motors]
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