Petrobras, Magalu, Americanas want to buy back shares; is it worth ‘sell’?

With the bad mood that has hit the Brazilian capital market in recent months, pushing prices far from historical highs, companies listed on the Stock Exchange announced that they will buy back part of the shares that are on the market. According to B3, 75 companies have open buyback programs, with 53 opening programs this year.

And it’s not just any company: Petrobras, Magazine Luiza, Americanas, Vale and Ambev, for example, are on the list and promise to withdraw part of the shares in circulation in the market so that they return to their boxes. Why do some companies choose to buy back shares that are already in the hands of other investors? What does this change for the investor? Is it worth selling your shares in buyback programs? See below what experts say.

Why do companies want to take shares out of the market?

THE repurchase shares is a way for a company listed on the stock exchange to buy percentages from the company itself in order to put them in custody or even cancel them. Usually, this practice occurs when the price of papers in the market is considered too low by the management.

“Per practice market, it is common for companies to make this repurchase when their shares fit into fundamental parameters that consider the stock to be cheap in the question of share price x profit”, says Sidney Lima, analyst at Top gain.

In I wake up with Virginia Prestes, professor of finance at FAAP, the announcement of a buyback program can signal to the market that management trusts the business.

“When at companies ask for authorization [para um programa de recompra], they have a deadline to make this purchase and this does not always happen. If she makes this repurchase it’s a good sign because she probably believes the multiples are trading well below, then it’s worth it to use the cash to buy those shares. It could be a good entry point,” he says.

Multiple is the relationship between the share price and the company’s operating indicators, such as profit, cash, dividends, etc.

Can you make money with stock buybacks?

According to experts consulted by the UOL, O investor can make money in two ways with stock buybacks. The first is to already be a shareholder of the company and see the price of shares increase after the announcements — which signals to the rest of the market the management’s confidence in the
company.

“It’s very positive, much more because of the signal to the market of that by the repurchase itself”, says Bruno Komura, strategist at Ouro Preto Investimentos.

Second Komura, as repurchases usually do not cover relevant percentages of companies on the stock exchange, this movement is felt more by signaling than by increased demand in the market.

“THE repurchase it’s usually quite small, so the program doesn’t influence the stocks that much and I don’t think it will impact the market. The impact is much more due to the indication that the management is confident in its management and this can influence actions”, he says.

Vale’s shares, for example, rose 3% the day after the buyback program was announced.

THE other way to make money from buyback programs is by increasing dividends. The logic is that with fewer shares available on the market, the profit will be split into larger shares.

“O investor it ends up having a higher dividend, as there are fewer shares in circulation and, when the company divides the profit by the shares, the dividend ends up higher for those who already own the shares”, says Virgínia Prestes.

In addition to Petrobras, Americanas, Vale and Magazine Luiza, companies such as Bradesco, Santander, Itaúsa, Siderúrgica Nacional, Raia Drogasil, Porto Seguro, Cosa, Locaweb and CSN have open buyback programs. You can see the full list of 75 companies here.