Morgan Stanley IM: Which One Is It? Equity Issuance and Retirement

• This report reflects on companies that both issue and retire shares around the same time, a topic that is relevant for corporate leaders and investors who think carefully about capital allocation.
• We segregate companies into those that are above and below the median in issuance via stock-based compensation and in share buybacks, and we then examine the shareholder returns in each of the quadrants.
• The returns for the stocks of companies issuing stock have been substandard, and the returns have been attractive for those that retire stock, on average.
• Executives who both issue and retire stock at the same time may fail the central goal of capital allocation, which is to buy low and sell high. Which one is it?

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