Facebook to Buy Back Shares for the First Time

By Sarah Frier for Bloomberg.

Facebook Inc. said it will buy back as much as $6 billion in shares, its first repurchase program, in a bid to appease shareholders awaiting the results of big investments in potentially risky new growth areas.

The buyback involves Class A common stock and will start in the first quarter of 2017, the company said in a regulatory filing. Facebook has $26 billion in cash and marketable securities and is deploying some of that for buybacks while still planning to increase its spending on growing the business.

Facebook shares rose 1 percent in after-hours trading Friday, following the news. The company joins a growing group of big U.S. technology firms using buybacks to keep shareholders happy. The boom in digital advertising has left Facebook and Alphabet Inc.’s Google with billions in cash and investors often complain if that’s not being put to profitable use.

“Facebook is very efficient with its capital and very responsible with how it uses that capital,” said Brian Wieser, an analyst at Pivotal Research Group, citing multibillion dollar acquisitions of WhatsApp and Oculus in 2014. “Although some people took issue with their choices at the time, they clearly saw value.”

Still, Facebook has been an outlier. Among the top 10 U.S. technology companies, ranked by cash and marketable securities, Facebook was the only one not buying back stock, according to data compiled by Bloomberg. Alphabet announced its first buyback in October 2015. Apple Inc. began repurchases in 2012.

U.S. technology companies have more than doubled their repurchases of shares since 2012, spending $131 billion last year, according to Bloomberg data on companies in the sector worth more than $5 billion.

It’s not that Facebook has run out of places to invest. The company has said that 2017 will be a year of increased spending, especially on hiring engineers and expanding its infrastructure. The buybacks could to help return value to shareholders while other longer-term investments play out.

Facebook’s shares outstanding have increased as it compensates employees through stock options. The company has 2.9 billion shares trading, up from just over 2 billion in 2012, according to data compiled by Bloomberg. Repurchases could also help keep that number from rising too quickly.