Sony unveils another record buyback, its second this year

TOKYO: Sony Corp. has unveiled another record share buyback just months after completing a similar program, underscoring Chief Executive Officer Kenichiro Yoshida’s commitment to supporting his stock price in a tumultuous environment.

The Tokyo-based company will purchase as much as 4.8% of its outstanding shares, spending up to 200 billion yen ($1.8 billion), it said in a statement. The repurchase period begins Friday and lasts till March 31. 

That comes after it spent 100 billion yen from February to buy 1.5% of stock, then the largest buyback in history in terms of value.

Sony becomes the latest Japanese company to announce a buyback of at least $1 billion as the nation’s companies become increasingly responsive to shareholder activism. 

It’s Yoshida’s preferred tool to thwart pressure from shareholders as he navigates a deteriorating economic and market environment. 

His company is grappling with plateauing smartphone demand and fewer blockbuster titles for the aging PlayStation 4. Escalating tensions between the U.S. and China now also cloud the global economic outlook.

“This is a message that investors shouldn’t sell Sony just because the rest of the market is falling,” said Makoto Kikuchi, founder of Myojo Asset Management Co. “It’s also a message that says Sony is still cheap compared with the company’s actual earnings.”

With the back-to-back stock repurchases, Yoshida is beginning to leave his mark as CEO on the storied electronics giant. 

The finance guru was elevated to the position about a year ago and so far has earned a reputation more for cost cuts and buybacks than long-term strategic decisions. 

Thursday’s announcement would mean spending about 14% of Sony’s total cash reserves purchasing its own stock.

The new record buyback will likely quiet complaints from shareholders that Yoshida can do more to reward them. 

Last month, Reuters reported that Daniel Loeb was preparing to build a stake in Sony to sway corporate strategy, although the hedge fund manager has yet to publicly acknowledge the move.

The buyback will likely dominate conversations on May 21, when executives will update investors about their strategy. 

Shareholders will be looking for an explanation after the company last month abruptly withdrew some of its medium-term profit targets, saying the operating environment was changing drastically.

Operating profit will be mostly flat this fiscal year after adjusting for one-time items, the company announced last month. Shares have gained 3.1% since the results -- compared with a 5% drop for the broader Japanese market -- as analysts were surprised that Yoshida’s outlook was less conservative than expected.

That made Thursday’s announcement all the more surprising for some investors. Unlike February’s buyback, when shares were reeling following an earnings miss, this time the stock has fared relatively well in recent weeks.

“They’re becoming very proactive on boosting shareholder returns,” said Kikuchi. - Bloomberg

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