On Friday, Sony Corp revealed its first-ever major share buyback that is worth 100 billion yen (£702.8 million). The announcement helped its stock recover from a hammering days earlier when the investors freaked out over lacklustre earnings.
The signifies the second major buyback of Japan this week after SoftBank Group Corp., the tech investor, scheduled the repurchase of 600 billion yen worth of shares by using proceeds from the IPO of its telecoms unit. It also sent its stock price soaring.
Japanese companies have been raising the buybacks as the investors urge for higher returns in a country that is not known for showering its shareholders in riches. The government has also chimed in. It hopes that higher returns will attract more foreign money to the country.
Over the past five years, the amount of buybacks that was announced by listed firms has increased by approximately 2.5 times.
In the past week, announcements of buybacks have accompanied the earnings reports of Yamaha Corp, the instruments maker, Itochu Corp, a trading house, and JXTG Holdings Inc, an energy firm, and Japan Tobacco Inc.
Sony said that its buyback, is its first ever that is aimed at boosting shareholder returns. IT said that it will be equivalent to 2.36 percent of its outstanding shares and will be conducted through the 22nd of March. On Friday, the shares of the company closed 4 percent higher at 4,906 yen.
A spokesperson for Sony stated: “Our financial health has improved enough to conduct the repurchases.” He added that those low share prices were recently considered as one of the factors in its decision.
The shares of Sony dropped by 14 percent to their lowest in over a year after the company reported declining numbers in its previously thriving gaming business. Sony also reduced its outlook for imaging sensors after citing weakness in the global smartphone market.
Nevertheless, most analysts applaud the turnaround of Sony in the past few years spearheaded by Kenichiro Yoshida, initially as the chief financial officer of the company and, since last year, as its chief executive. The company struggled for profitability as its consumer electronics business lost some market share to its rivals in Asia. It comes after it reinvented itself as an entertainment company that has stable revenue from music content and gaming.
A senior analyst at IwaiCosmo Securities, Hiroyasu Nishikawa, said that the buyback revealed how Sony had become more sensitive to investors in recent years.
He stated: “This announcement was well timed, and it shows it’s watching the market very well.”
He added: “In the past few years Sony gradually started recovering what it’d lost in the previous 20, 25 years. This latest move is one that’s attuned to the stock market.”
Sony has been steadily increasing its shareholder return through higher dividends over the last couple of years. Refinitiv data revealed that it paid 7.09 percent of its profit in dividend in the most recent fiscal year. That compared with 22.5 percent at Apple Inc,. the U.S. tech giant.
A corporate lawyer based in Tokyo, Stephen Givens, said that while the buybacks of Sony’s and SoftBank’s may have been aimed shoring up stock prices, they were a part of the trend of Japanese companies that are seeing the advantages of buybacks as compared with cash dividends.
He stated: “A stock buyback gives shareholders a choice to sell out or stay invested, whereas a dividend forces all shareholders not only to disinvest but to pay tax at higher rates on the cash dividend than they would pay if they sold their stock back to the company.”