Why Crown pulled the plug on stock repurchase program

Paints manufacturer Crown Berger (BERG), also known as Crown Paints, has dropped its stock repurchase program because of unfavorable market conditions. Companies typically buy back their shares when they deem the shares undervalued. But Crown Paints shares have soared over the last one year, meaning they are more expensive than they were when the company announced the stock repurchase program last year.

Crown Paints shares were trading at Ks57 in June last year. The shares were trading at Ks80 on Friday, and at a higher price-to-earnings ratio than a year ago. A lower price-to-earnings ratio is deemed favorable.


Crown Paints exited 2017 with Ks214 million in cash
The management of Crown Paints determined that the high valuation of the stock would defeat the strategic goal of the stock repurchase program, so it decided to suspend the program. The company had intended to spent Ks600 million toward the stock repurchase program. The company had Ks214.2 million in cash at the end of 2017, up from Ks205.6 million at the end of 2016.

No Kenyan companies has ever bought back its stock
In addition to paying dividends, established companies may repurchase their shares from time to time as another way of delivering value to shareholders. But no Kenyan listed company has ever repurchased its own stock, so Crown Paints would have become the first in the country to do it.