Share buybacks – purchases by a company of its shares – are notably increasing across many UK sectors. Projections for 2025 indicate that repurchases could exceed $1.1 trillion in the US. This growth is indicative of underlying tariff uncertainty and its impact on sales, costs, and the general economy. Buybacks are typically seen as a positive manoeuvre by companies and investors. They reduce the quantity of shares available to trade, increasing earnings per share and stock prices. This lessens the risk of hostile takeovers – higher share prices make it harder for an outside bidder to acquire a controlling stake.
Notably, buybacks represented 42% of the capital returned to shareholders by FTSE 350 issuers in the three years following the COVID-19 pandemic. Companies such as Future, HSBC and Santander in the UK, alongside US companies such as Alphabet, Apple and JPMorgan Chase, have recently engaged in repurchases. Uber’s decision to initiate a buyback following its surge in second-quarter profits from $0.47 per share to $0.63 per share in 2024 also exemplifies this trend.
However, while these actions may bolster short-term stock prices, they could also reflect a strategic avoidance of more impactful long-term investments, such as investing in factories to improve operational capacity or increasing dividends. Buybacks may artificially boost these prices at a time of already inflated valuations. This preference implies that President Trump’s trade war may stifle sustainable growth over time.
The regulatory landscape further complicates this issue. In early July, the UK Takeover Panel introduced a consultation paper aiming for substantial changes to share buyback regulations. The proposals include revisions to disqualifying transactions and new disclosure requirements if a buyback could increase an unrelated shareholder’s voting rights above the Rule 9 takeover threshold. These proposals contrast with the more stringent disclosure requirements established by the SEC in the United States.
For these buybacks to occur, law firms will be involved in referring to a company’s articles of association, reviewing the share capital, drafting the buyback contract and obtaining the shareholders’ approval. They must handle subsequent buyback administration tasks, which requires updating the company’s register of members, filing the correct forms with Companies House, and preparing and submitting stamp duty paperwork to HMRC.
Written by: Lauren Ajayi
Edited by: Imran Chaudhri
Sources
Wall Street Journal
Harvard Business Review
Financial Conduct Authority
Financial Times
