The latest market correction that came from fresh doubts about the economic future of the European Union took global stock markets to lows not seen since March of 2009. There is fear of fluctuating interest rates, and some European companies have viewed lower stock prices as an opportunity to invest in proprietary shares (or bought-back shares) instead of dedicated resources to other areas of their business.
So what Spanish companies on the EuroStoxx 50 hold shares of their own company? Only four Spanish firms possess between 0.3% and 1.1% in proprietary shares. They are: Telefónica, Iberdrola, Santander and BBVA. This rate is significantly low compared to other European companies in the index.
There are several reasons that a company might buy proprietary shares. In the context of this still unresolved debt crisis, we are looking at two-year lows in the stock markets and there are a few reasons why a company might want to invest in itself. For example, a company posting low share prices in the marketplace compared to its real book value would be a strong reason. Who would not want to invest if potential profits on the investment would be high?
Despite the obvious answer this question, a current economic reality might not allow a company to buy up its own shares when they need to allocate the money to more pressing demands.
This is the case for Eni. The Italian petroleum company already owns 9.6% of its own shares, and the maximum level permitted by law is 10%. This percentage puts it at the top of the list of companies who own their own stock. Over the past few days it has been noted that the company may resume activity in Libya.
