A Peek Into GM’s Share Buyback History

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Back in fiscal 2015, General Motors had purchased a significant portion of its common stocks.

In subsequent years, General Motors had continued the share buyback program but the frequency at which the stock buyback was done had slowly dwindled.

Only in fiscal 2020 that GM had totally suspended the share buyback program, most likely due to the COVID-19 disruptions.

As of fiscal 1Q 2021, GM’s stock buyback suspension was still enforced.

While GM’s share buyback program has been indefinitely suspended, it is without a doubt that the company had bought back quite a considerable number of shares and the buyback program had greatly reduced the company’s share count.

This article explores General Motors’ share buyback history and how the buyback program had affected the company’s shares outstanding.

Other than the historical shares outstanding, we also look at other metrics, including the number of shares repurchased, the dollar amount spent on shares repurchases and stock-based compensation expenses.

Let’s go to have a look!

GM’s Shares Outstanding

GM’s common stock outstanding

The chart above shows General Motors’ outstanding shares between fiscal 2015 and 2021 on a quarterly basis.

As seen from the chart, GM’s share count had greatly declined in the first several years after fiscal 2015 but has slowly crept up thereafter.

The number of shares outstanding has dropped from roughly 1.6 billion reported in fiscal 1Q 2015 to only 1.40 billion reported in fiscal 1Q 2018, the lowest shares outstanding number the company has ever reported.

Between fiscal 2015 and 2018, GM’s stock outstanding has declined by nearly 200 million units.

The decline in common stock outstanding continued for as long as the company was re-purchasing its common stocks during those periods.

However, GM’s share repurchasing program started to crack in fiscal 2018 and the company had only re-purchased its stock once after 2018.

As a result, GM’s shares outstanding slowly crept up starting in fiscal 2018 and reached as much as 1.45 billion as of fiscal 1Q 2021.

Between fiscal 2018 and 2021, GM’s common stocks outstanding has risen by as much as 4%.

GM’s share outstanding increment between fiscal 2018 and 2020 has been primarily driven by the company’s stock incentive program which awards company stocks to its employees.

In short, GM’s stock outstanding increased as soon as the company suspended its share buyback program and reduced the frequency in which stocks were bought back.

GM’s Stock Buyback History

GM’s stock buyback history

The chart above shows GM’s stock buyback history over the past 6 years between fiscal 2015 and 2021.

As the chart shows, the majority of the share buyback occurred in the early years, with fiscal 2017 being the most productive in terms of share buyback at roughly 120 million shares being bought back.

However, between fiscal 2018 and 2021, GM’s share buyback effort reduced considerably and the company bought back only a total of 5.5 million shares.

GM announced to suspend the share buyback program in 1Q 2020 after purchasing about 3 million common stocks in the same quarter for $90 million.

According to GM, the share buyback will only resume when the company no longer has outstanding borrowings under the revolving credit facilities.

The following is an excerpt extracted from the 1Q 2020 quarterly filings regarding the share buyback policy:

• As part of the extension of the three-year, $4.0 billion facility, we have agreed not to execute any share repurchases until we no longer have outstanding borrowings under the revolving credit facilities, except for the three-year, $3.0 billion facility.

  In addition, we are restricted from paying dividends on our common shares if outstanding borrowings under the revolving credit facilities exceed $5.0 billion, with the exception of the three-year, $3.0 billion facility.

Not only has GM suspended its share repurchase program, but the company also has suspended its cash dividend when the respective revolving credit facilities exceeded $5.0 billion under existing borrowings.

GM’s Cumulative Stock Buyback

GM’s cumulative stock buyback

Cumulatively, GM’s shares repurchased increased the most in fiscal 2015.

The figure topped out at 300 million in fiscal 1Q 2018 and has remained at this level until the latest quarter of 1Q 2021.

GM’s share repurchased number has stalled at the 300 million levels when the company has reduced the number of shares repurchased since fiscal 2018 and has totally suspended the program in fiscal 2020.

GM’s Dollar Spent Under The Stock Repurchase Program

GM’s dollar spent on stock buyback

The above chart show GM’s amount of dollars spent under the buyback programs from fiscal 2015 to fiscal 2021.

GM’s dollar spent on share repurchase had ranged from $100 million to as much as $1.7 billion dollars over the 5-year period.

GM spent the most money on share repurchase in the early years, for example, between fiscal 2015 and 2017.

Back in those days, GM’s share price was trading at roughly $30~$40 USD per share.

GM should be buying back shares during the COVID period instead of suspending the buyback program when its stock price crashed to a historical low of only $10 in early 2020.

The result shows that GM may have badly timed its buyback when the stock price was at a premium between 2015 and 2017.

GM’s Cumulative Dollar Spent Under The Stock Repurchase Program

GM’s cumulative dollar spent on stock buyback

Cumulatively, GM’s dollar spent on share repurchases topped out at $11 billion in fiscal 1Q 2018.

Prior to fiscal 2018, GM’s dollar spent on stock repurchases increased the most as the company ramped its stock buyback program.

GM’s dollar spent on share repurchases has remained flat at the $11 billion levels since fiscal 2018 after the company significantly reduced its stock buyback and has totally suspended the program in fiscal 2020.

In short, GM spent a total amount of $11 billion on share repurchases over the past 6 years.

GM’s Stock-Based Compensation Expenses

GM’s stock-based compensation expenses

GM’s common share outstanding slowly increased after the company stopped the stock buyback.

Why is that?

The answer lies in GM’s stock-based compensation.

Stock-based compensation is a form of stock incentive granted to employees for their services.

Under GM’s stock incentive awards, the stocks granted can be in the form of RSUs, RSAs, PSUs, and stock options.

During the process, new stocks are issued and given to employees, and the issuance costs are treated as an expense in the company’s income statements.

Additionally, the new stocks issued will dilute the existing share count.

Therefore, GM has been adding more shares under its stock-based compensation program all these years.

As shown in the chart above, GM’s stock-based compensation expense averaged around $500 million between fiscal 2015 and 2020 on an annual basis.

The most recent one in fiscal 2020 was $351 million.

GM’s stock-based compensation expense for the last 6 years totaled more than $2.7 billion.

This amount represents as much as 25% of GM’s total stock buyback budget from fiscal 2015 to 2021.

That was quite a huge amount considering that it took up nearly a quarter of the company’s buyback budget for the past 6 years.

Conclusion

In conclusion, GM has aggressively bought back its shares between fiscal 2015 and fiscal 2017.

GM has bought back more than 300 million shares under its stock repurchase program before being suspended indefinitely since 1Q 2020.

In terms of dollar amount, GM has spent nearly $11 billion USD to buy back its shares in the last 6 years.

While GM’s common stock outstanding has increased to 1.45 billion units as of fiscal 1Q 2021, it was still far below the level seen in fiscal 2015.

GM’s stock-based compensation has caused the company’s share count to tick up since fiscal 2018 when the company has slowed down and has totally suspended its share buyback program.

References and Credits

1. Financial figures in all charts were obtained and referenced from GM’s quarterly and annual filings available in GM SEC Filings.

2. Featured images are used under Creative Common Licenses and obtained from raymondclarkeimages and Jason Mrachina.

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Disclosure

The content in this article is for informational purposes only and is not a recommendation or any financial advice to purchase a stock.

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