Microsoft Corp shares rose 1% at the start of trading on Wednesday after the company announced a $ 60 billion share buyback plan, the largest on record.
The announcement comes just days after two Democrats in the U.S. Senate unveiled a proposal to tax corporate share buybacks to help fund President Joe Biden’s $ 3.5 trillion investment plan.
Senators said the “Share Buyback Liability Act” would encourage large companies to invest in their workers rather than enriching investors and executives by raising stock prices.
Democratic lawmakers have also proposed a substantial reduction in tax cuts implemented by Donald Trump’s administration, including raising the top corporate tax rate to 26.5% from the current 21%.
Microsoft shares have climbed about 35% this year, making it the second most valued company in the world with a market cap of $ 2.25 trillion.
The buyout plan, which has no end date and can be terminated at any time, follows similar announcements from other US tech giants.
Apple and Alphabet said earlier this year that they are returning $ 90 billion and $ 50 billion to shareholders, respectively, and have accelerated their plans since corporate tax cuts in 2017.
“They have to be opportunistic … be well covered given the ambiguity of the future of tax law,” said Doug Ciocca of Kavar Capital Partners, which owns Microsoft shares.
Microsoft has benefited from an accelerated shift to cloud computing and demand for laptops during the pandemic and amassed US $ 130 billion in cash and cash equivalents. It announced its latest US $ 40 billion buyback program in 2019.
(Reporting by Nivedita Balu in Bangalore; Editing by Tomasz Janowski)