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Investing.com -- Shares of AppLovin (NASDAQ: NASDAQ:APP) gained 6% as the company announced a substantial $500 million immediate availability for share repurchases. The move comes as a strategic response to the stock’s 22% drop last week, influenced by negative sentiment from short seller reports.
The Board of Directors at AppLovin authorized changes to its share repurchase program on February 28, 2025. Despite the existing limitation tied to the company’s Free Cash Flow, the new authorization allows for an immediate repurchase of shares up to the Current Limit of $500 million. Furthermore, this limit will be expanded in future quarters by the Free Cash Flow generated in the preceding quarter. The repurchase program does not require the company to acquire a specific amount of Class A common stock and can be suspended at the company’s discretion.
The repurchases are set to occur through open market purchases or privately negotiated transactions, depending on market conditions, legal requirements, and other factors. The company may also use Rule 10b5-1 plans to facilitate these repurchases. Notably, the modifications made by the Board of Directors do not alter the Existing Repurchase Maximum Amount of approximately $1.772 billion.
This proactive step by AppLovin to buy back shares signals confidence in the company’s value proposition and financial health, particularly after the recent sell-off triggered by short seller critiques. The decision to make a significant amount of funds immediately available for repurchases showcases a commitment to capital return and shareholder value.
The share repurchase program is a common strategy employed by companies to reduce the number of shares outstanding, potentially increasing the value of remaining shares and signaling to the market a belief that the stock is undervalued. AppLovin’s announcement reflects such a strategy, aiming to stabilize and possibly enhance shareholder value in the face of recent market volatility.
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