Lam sets $25 billion share repurchase after 16% stock drop

Lam Research has approved a new program to repurchase up to $25 billion of its own stock, the Financial Times reported. The US maker of chipmaking machines announced the plan after American trading ended on Nov 5. In that session its shares lost 16.36% and closed at US$185.20.

The same announcement included a quarterly dividend, according to the Financial Times. The size of that payout and the date it will be paid have not been reported.

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A $25 billion plan on the heels of a 16% slide

In a share repurchase, a company spends its own cash to take stock back from the market. That leaves fewer shares in investors’ hands. A board authorization like this one sets the most the company may spend. It does not oblige the company to use the full amount.

Timing is what sets this plan apart. Lam’s board approved it right after one of the stock’s steepest one-day losses. At a lower share price, a fixed sum of money retires more shares than it would have a day earlier.

Barron’s took up that point in a piece on Nov 6. The magazine argued that the plan arrived at a good moment for Lam. That is Barron’s judgment, not a finding about the company’s finances. Lam’s own reasons for the size and timing of the program have not been reported.

Lam sits a step away from the chipmakers that Pacific Tape readers follow. It does not produce chips itself. It sells the machines that factories use to make them. Our guide to the main chip-equipment makers explains what each one builds and who its customers are.

Lam fell further than the US chip index

The drop in Lam’s stock was part of a broad fall in American chip shares. The PHLX Semiconductor Index, known as the SOX, closed at 9,011.14 on Nov 5, down 12.25% from Nov 4. The index tracks US-listed chip stocks. It is a common reference for traders in Asia; our explainer covers how the SOX is built and why Asia watches it.

Lam’s 16.36% loss was deeper than the index’s. So the repurchase news came at the end of a day when the company’s shares did worse than the sector around them.

On Nov 5, the US market did not single out any one cause for the rout. Lam’s statement on the repurchase did not address its share price.

Seoul and Tokyo each lost about 6% the next day

The slide reached Asia’s main markets. Taiwan’s TAIEX closed at 41,574.72 on Nov 5, down 3.2% from Nov 4.

On Nov 6, South Korea’s KOSPI closed at 5,059.69, a fall of 6.02%. Japan’s Nikkei 225 ended that day at 57,434.77, down 5.96%. Both moves were larger than Taiwan’s drop the day before. We covered the Seoul session in Chip rout deepens as KOSPI slides 6% for a second steep loss.

The repurchase plan was public before trading began in Seoul and Tokyo on Nov 6. The figures above show only that the indexes fell on that day. They do not show whether investors in Asian chip stocks reacted to Lam’s announcement in any way.

For holders of Samsung Electronics, SK hynix, TSMC, Micron or Kioxia, the plan is a data point on how one large US supplier is using its cash during a steep fall in chip shares. Other equipment makers have not announced similar steps in response to the drop.

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Information only, not investment advice.