Ford Motor Co. has authorized a plan to buy back up to 31.7 million of its stock shares, which is a small repurchase, to offset the dilution to shares caused by its employee compensation program as well as other convertible instruments.
Why Ford is buying back 31.7M shares
In a government filing dated March 13, Ford said the buybacks are meant to mitigate the chance of common stock dilution that could occur after share-based pay was given out this year and when 0.00% convertible notes were due on March 15.
Stock dilution from compensation and convertible notes
Ford spokesman Dave Tovar said the program is an anti-dilutive measure done mostly to offset the effect of share-based compensation, which Ford granted to many salaried employees earlier this month. When Ford gives employees shares, it could dilute the stock price because there are then more shares in the market, so buying shares back reduces the number of shares in the market.
Ford’s salaried employee compensation plan has three components: base salary, an annual cash bonus and an annual stock award in the company, Tovar said. Ford does not give the stock awards to all employees, but most salaried employees do receive it at various levels including senior executives. Ford did a similar stock buyback program after handing out share-based employee compensation in 2024, 2023, 2022 and 2021, Tovar said, but not in 2025.
As for the convertible notes, it means that usually when a loan period ends, accrued interest must be repaid or converted into equity.
How the buyback fits Ford’s pivot away from EVs
The buyback move is a part of Ford’s efforts this year to balance its plan to redirect its business from electric vehicles toward hybrids and gasoline vehicle models, while still keeping shareholders happy. Ford said in December it would pivot its business plan away from EVs this year, a move that will cost it $19.5 billion in restructuring costs.
What analysts say about the timing
With the market recently declining on the global economic uncertainty brought about by the war in Iran, analysts said Ford’s decision to do a stock repurchase is good timing.
“The overall market has been soft and Ford (is) smart to see the green light and do this,” Dan Ives, managing director and senior equity analyst at Wedbush Securities, told the Detroit Free Press. “This is a smart strategic move for Ford to take advantage of its stock under pressure. This also shows confidence to investors at a much needed time. We applaud this move.”
David Whiston, autos analyst at Morningstar, said Ford has done such stock repurchases to offset dilution for years on and there’s extra dilution this year from the convertibles. He said it’s a good move to keep the share count constant, and Ford should do it more often.
“That count is the sole denominator in many valuation models so keeping it flat is better than it going up over time due to stock comp and other dilution events,” Whiston told the Detroit Free Press. “I think the market would welcome more Ford buybacks beyond offsetting dilution but that does not appear to be in the plan as shareholders prefer the dividend and special dividends.”
Impact on Ford stock and shareholders
When companies do stock buybacks, it can typically boost stock prices and shareholder value because it reduces the number of outstanding shares, thereby increasing earnings per share and signaling management’s confidence.
“Companies initiating small repurchase programs see an average increase in their share price of 2% to 3% on the day of the announcement. Those that undertake larger buybacks, involving about 15% or more of their shares, see prices increase by some 16% on average,” according to a report on www.McKinsey.com by Richard Dobbs and Werner Rehm.
Ford has about 3.98 billion outstanding shares, according to www.investing.com. Shortly after the market opened on March 16, Ford stock was trading at $11.80, up 1.07%. But the price is far from Ford’s peak stock price this year of $14.43 on February 25.
What’s next?
Ford can repurchase shares through open market transactions or purchases made in private as part of the program, but the automaker said in its filing that the amount and timing of purchases will depend on the “business, economic and market conditions, corporate, legal and regulatory requirements, prevailing stock prices, trading volume and other considerations.”
Ford typically does buybacks in tranches, or in slices or portions. If it were to buy back nearly 32 million shares at about $11 a share, it would cost about $375 million.
Ford also stated in the government filing that its buyback program may be suspended or stopped at any time, and it is not obligated to acquire any amount of common stock.
“The company expects to utilize its existing cash and cash equivalents to fund repurchases under the share repurchase program,” Ford’s filing stated.
Jamie L. LaReau is the senior autos writer for USA TODAY Co. who covers Ford Motor Co. for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @jlareauan. To sign up for our autos newsletter. Become a subscriber.
This article originally appeared on Detroit Free Press: Ford to buy back nearly 32M shares of its stock. Here’s what it means
Reporting by Jamie L. LaReau, Detroit Free Press / Detroit Free Press
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