Are French companies affected by the American trend of share buybacks? – Selexium

What are the leading sectors for share buybacks in 2022?

Undoubtedly, the companies emerging winners from the economic situation of 2022 are the first at the top of the list of share buybacks. They evolve in the fields ofenergyof banking sectorbut also concerns luxury companies. And it’s no secret that Total Énergie is on the first step of this golden podium by having acquired for 7.4 billion euros of shares. A staggering sum which represents in all and for all, 5% of global capitalization of the group, cited as an example by all the media seizing on the question of the superprofits of French companies in favor of the repurchase of shares. Far behind, but whose numbers are no less important, Axa et Those Mittals bought back 2.9 and 2.8 billion euros of shareholder shares in 2022. This is followed by the luxury company LVMH with an amount dedicated to the buyback of its shares amounting to 1.6 billion euros in 2022, followed by Vinci with 1.1 billion euros.

Record figures for the buyback of shares in European companies?

The billions scroll past to lose sight of it, but they are all the more impressive when one confronts them with the assessments of the repurchases of shares of companies over the previous years. In 2022the volume of share buybacks amounted to €27.2 billion in France, against 9.3 billion 5 years ago. If we extend these data to the European level, the share of corporate share buybacks in Europe in 2022 doubled between 2021 and 2022 alone.

What does the trend for share buybacks in 2023 predict?

The rise in the share of superprofits reserved for the repurchase of corporate shareholder securities is not about to falter for this new year. Total Energy maintains its place at the top of the list, with forecasts of share buybacks in first quarter 2023 to the height of 2 billion euros. On the bank side, BNP Paribas pay back account 5 billion to its shareholders, following the sale of the Bank of the West, its American subsidiary. As for the giant LVMH, no less than 6 billion euros will be returned to its shareholders in the form of a dividend this year, 1.5 billion in share buybacks and “only” 400 million euros to be redistributed. to its salaried workers. The year 2023 is already shaping up to be a great year for shareholders in France, since the CAC 40 announced at the beginning of March the sum of 15 billion euros intended for share buybacks and to dividends of companies.

What is the use of the buyback of shares of large groups?

Why do large French and American companies buy back their own shares rather than redistribute them as dividends? This financial strategy is primarily intended to improve stock market indicators companies. When a company buys back its own shares, it participates in raise their value and to rarefy titles. Also intended to satisfy the appetite of the shareholders, the repurchase of their shares is not without economic consequences since this practice limits the amounts invested in the service of the actions intended for the evolution of the company. Limiting the growth of companies greedy in share buybacks, this is one of the main reasons that push the Government to react by anticipating theimpact this could have on employment.

Why corporate share buybacks are driving the debate?

As for the United States, the buyback of company shares is commonplace, in Europe, this practice literally exploded in 2022. If French companies have transposed this strategy of shareholder remuneration on the American model, it is not lacking in success. stir up debate.

The subject was also invited during theinterview d’Emmanuel Macron following the passage of the pension reform text in the National Assembly. The French president indicates that he wants to award a “outstanding contribution” to profit-generating companies, previously reused for share buybacks. This government desire to act to curb the enthusiasm of businesses is not totally innovative, since on the other side of the Atlantic, Joe Biden longed for strengthen the taxation of share buybacks American companies from 1% to 4%. At a time when France is on fire, carried by the burning anger of the workers concerning the pension reform, the force-feeding of shareholders at the expense of the improvement of wage remuneration is hard to pass. One thing is certain, culturally oriented redistribution of profits as dividendsthis change of course in favor of shareholders has not gone unnoticed in France.

In summary

• The major French groups at the head of the energy, finance and luxury sectors have devoted their superprofits to share buybacks in 2022;
• In 2022, the figures concerning the repurchase of shareholders’ shares by companies explode to reach 27.2 billion euros;
• The year 2023 promises to follow the same trend for the buyback of company shares, pushing the Government to react;
• By reinjecting their profits into the acquisition of their own shares, companies increase their value on the stock market, but limit their growth;
• In the United States, Joe Biden intends to increase the tax share on the buyback of company shares from 1% to 4%.