Study: Some stock repurchase plans just empty promises

http://news.illinois.edu/news/09/1007stock.html

10/7/09 | Jan Dennis, Business & Law Editor | 217-333-0568; jdennis@illinois.edu

CHAMPAIGN, Ill. – A new study backs longtime speculation on Wall Street that companies sometimes ballyhoo stock repurchase programs they never plan to pursue, hoping to stir a buzz that will mislead investors and pump up sagging share prices.

But phantom repurchase programs are rare, and most are rooted in sound economic motives that generally pay off for both companies and investors, said David Ikenberry, a University of Illinois finance professor and researcher for the study.

“The good news is that the vast majority of repurchase programs are solid and well intentioned,” he said. “But there appear to be a handful where companies are indeed trying to mislead the market. They’re down on their luck and hoping a repurchase announcement will spark a price reaction that might not be warranted.”

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