Stock buybacks the latest trend in Brazilian markets

Since the 1980s, stock buybacks have become a phenomenon in the U.S., with S&P 500 companies setting a new record for share repurchases last year. Indeed, they are now making their way into the Brazilian stock market as well, with 108 such deals in 2021 alone — 44 percent more than in the previous year. 

Stock buybacks occur when a company repurchases its own shares from the stock market. Sometimes they can benefit shareholders and can be an efficient way to return capital.

In Brazil, companies must file for buyback authorization from securities regulators, before having 18 months to complete the transaction, or ask for more time. The share repurchase trend in Brazil started picking up in the second half of last year and continued throughout January and February. Per Brazil’s securities commission CVM, another 15 companies announced their intention to proceed with buybacks in January, against just two from 12 months prior.

According to Claret Asset Management, “if a company sees its shares as undervalued and has excess capital which will not be used to pursue accretive projects, then a buyback could be a fantastic way to generate shareholder value.”

That is precisely the motivation of Brazilian telecom firm Brisanet. In an official statement, the company said it aims at “maximizing the generation of value for shareholders, without reducing share capital.”

“Another...