Solactive AG has launched the Solactive European Buyback Index (BUYEU), which will be used to underlie index-linked products by Société Générale Corporate & Investment Banking (SG CIB).
This includes swaps, options, warrants and certificates.
Buyback is defined as the purchase of its outstanding shares by a company. It is well-known as an alternative way for companies to ‘return’ cash to their shareholders by increasing earnings per share, used first in the US and more and more in Europe as well.
By repurchasing some shares, companies officials, regarded as having superior information, state that they consider the current shares available in the open market as undervalued.
Scientific research found outperformance patterns in a period of time from two months to two years after a buyback was announced.
Steffen Scheuble, CEO, Solactive, says: “We are pleased to launch the Solactive European Buyback Index for SG CIB, which will fill a gap in the market, at a time when buyback is becoming an increasing popular concept in the US, as well as in Europe.”
Stéphane Mattatia, head of global equity flow engineering in Paris, SG CIB, said: “A number of academic studies show high return generated by the stocks of companies which buy back their own shares. This appears as a transparent and regular source of performance, exactly the kind of investment our clients are looking for.”