The move is clearly aimed at boosting shareholder returns.
On Friday, Sony Corp announced its first-ever major share buyback worth $910 million (100 billion yen).
With the news reaching the market, its stock recovered from a hammering from investors who were spooked over its lackluster earnings.
Sony’s announcement marked Japan’s second major buyback this week: SoftBank Group Corp also announced a scheduled repurchase of its stocks worth 600 billion yen which sent its stock soaring.
Japan is seeing an increase in the number of companies opting for share buybacks with investors calling for higher returns. The government has also chimed in, hoping higher returns will attract more foreign money to Japan.
The amount of buybacks announced by listed companies has already jumped by 2.5 times over the past five years, according to data from I-N Information Systems, a financial data services firm.
In the past week, buyback announcements have accompanied the earnings reports of instruments maker Yamaha Corp, trading house Itochu Corp, energy firm JXTG Holdings Inc and Japan Tobacco Inc.
In a statement, Sony stated its buyback, its first ever, is aimed at boosting shareholder returns. The buyback will be equivalent to 2.36% of its outstanding shares and will be conducted through March 22.
“Our financial health has improved enough to conduct the repurchases,” said Sony’s spokesman.
According to Hiroyasu Nishikawa, senior analyst at IwaiCosmo Securities, the buyback shows that Sony has become more sensitive to investors.
“This announcement was well timed, and it shows it’s watching the market very well,” said Nishikawa. “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.”
According to Refinitiv data, Sony has been steadily increasing shareholder return through higher dividends over the last couple of years. It has paid 7.09% of its profit in dividend in the last fiscal year.
According to Stephen Givens, a corporate lawyer, Sony’s and SoftBank’s share buyback decisions may have been aimed shoring up stock prices.
“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,” said Givens.