Sunday, March 15, 2009

Bank of America (BAC) Share Buybacks

How much did Bank of America spend buying back its own stock in the open market in the last decade? The answer will surprise you. It was over $65 Billions. According to the calculations I did by going over the last 10 annual reports (10-K sec filings) of the Bank of America, the company bought back 1,183,126,000 (over 1 Billion) shares in the buyback or repurchase programs over the last 10 years.

BAC was buying back its own stock all the way into late 2007, but it did not buyback a single share in the year 2008. Basically, when the stock price was high, the profits were used to buyback the overpriced shares and when the stock price went down, there was nothing left to buyback the lower priced shares. It is funny how this works out! The current market capitalization of Bank of America is about 36 Billion as I type this. How does that make you feel if you own the stock?

The table below lists the numbers compiled from the annual reports of the Bank of America. If you ask me, this is a bigger scandal. I do not understand why this kind of shenanigans and wrong decisions by management and board are not discussed enough.

Let me tell you why this is a $65 Billion scandal. This is a scandal because the $65 Billion spent on buybacks did not reduce the number of shares outstanding.  Look at this quote from the 1999 10-K report. “As of March 15, 1999, there were 1,739,020,301 shares of the registrant's common stock outstanding”.  Accounting for the 2:1 split of the 2004, we can say that there were about 3,478,040,602 shares outstanding on the March 15, 1999. Now, look at this quote from the 2007 annual report. “As of February 25, 2008, there were 4,442,228,781 shares of Common Stock outstanding.” This means that after spending $65 Billion on buying back over 1.1 Billion shares from 1999 to 2007, the number of shares outstanding actually went up. It went up by about 1 Billion shares instead of going down by 1 Billion shares. This looks like $130 Billion scandal to me!

Where did all the money go? Why the number of shares outstanding went up by 1 Billion shares? What is going on here? What did the share buybacks accomplished?


Year endingShares bought backAverage price paidDollars spent
31-Dec-07 73,730,000 $ 51.42 $ 3,791,196,600 *
31-Dec-06 291,100,000 $ 49.35 $14,365,785,000 **
31-Dec-05 126,437,000 $ 45.61 $ 5,766,791,570 **
31-Dec-04 147,859,000 $ 42.52 $ 6,286,964,680 **
31-Dec-03 129,000,000 $ 75.76 $ 9,773,040,000 ***
31-Dec-02 109,000,000 $ 68.55 $ 7,471,950,000 ***
31-Dec-01 82,000,000 $ 57.58 $ 4,721,560,000 ***
31-Dec-00 146,000,000 $ 55.74 $ 8,138,040,000 ****
31-Dec-99 78,000,000 $ 62.28 $ 4,857,840,000 *****
 Totals 1,183,126,000 $ 55.09 $65,173,167,850

Sources:
* - Page 8 
http://www.sec.gov/Archives/edgar/data/70858/000119312508041665/d10k.htm

** - Page 146
http://www.sec.gov/Archives/edgar/data/70858/000119312507042036/d10k.htm

*** - Page 109
http://www.sec.gov/Archives/edgar/data/70858/000119312504032312/dex13.htm

**** - Page 86
http://www.sec.gov/Archives/edgar/data/70858/000095016801000538/0000950168-01-000538-0001.txt

***** - Page 77 http://www.sec.gov/Archives/edgar/data/70858/0000950168-00-000621.txt

3 comments:

Ed said...

This is very concerning. Have you thought about taking this to an investigative reporter or someone at the SEC?

Anonymous said...

Bank of America over the last ten years acquired various firms which explains the increase in the shares outstanding

Alex said...

You have to remember that exercised warrants/options and the payment of acquisitions with BAC shares increases the number of outstanding shares.