Facebook Parent Meta Ramped Up Stock Buybacks at a Bad Time

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Mark Zuckerberg picked a bad time to ramp up share repurchases at

Meta Platforms
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Meta (ticker: FB), formerly Facebook, repurchased a record $ 19.2 billion of stock in the fourth quarter when the company shares averaged about $ 330.

The stock is down $ 72, or 22%, to $ 251 a share in premarket trading Thursday morning after the company reported lower-than-expected earnings for the latest quarter and gave disappointing guidance for the current period.

Meta repurchased a record $ 44.8 billion of stock in 2021 and the vast bulk of that — some $ 33 billion — occurred in the second half of the year. CEO Zuckerberg would have benefited shareholders more by paying a dividend given the poor timing on the buybacks. Stock repurchases at attractive prices can benefit investors by reducing shares outstanding and lifting earnings per share. The company pays no dividend.

The fourth-quarter buybacks amounted to about 2% of the company’s shares outstanding and were a sign that Zuckerberg felt the stock was cheap in the $ 330s. It will be interesting to see if the company continues its repurchases at such an aggressive pace in the current period at lower prices.

How aggressive were the fourth-quarter buybacks? They were nearly double the company’s net income of $ 10.3 billion in the period. The company was willing to draw down its big hoard of cash and equivalents by about $ 10 billion in the quarter to buy the stock. Meta ended the year with $ 48 billion of cash and equivalents, or about $ 17 a share.

Zuckerberg and other executives did not address the buyback on Wednesday’s earnings conference call.

Mark Mahaney, an analyst at Evercore ISI, wrote in a client note published Wednesday that he sees a moderation in buybacks to roughly $ 13 billion a quarter for the foreseeable future, down from the record $ 19 billion in the fourth quarter.

Write to Andrew Bary at andrew.bary@barrons.com