Warren Buffett-Backed Mitsubishi Hits Record High After Announcing $3.4B Share Buyback Plan

Japan’s leading trading company, Mitsubishi Corp MSBHF, has seen its shares soar to an all-time high following its announcement of a massive share buyback plan.

What Happened: On Wednesday, Warren Buffett-Backed Mitsubishi’s Tokyo-listed shares hit a record high of 2,812.5 yen ($24.24), marking an 11% increase from the previous day. This surge came after the company declared its intention to repurchase shares worth 500 billion yen ($3.4 billion), Reuters reported.

The buyback, combined with an earlier repurchase and an annual dividend, is expected to result in a total shareholder return of 94% for the fiscal year ending in March. Analysts at Jefferies predict that Mitsubishi could potentially return an additional 500 billion yen to shareholders by the end of March 2025, if the company does not identify attractive acquisition targets.

“If the company does not find attractive acquisition targets, we think that management would release the excess cash back to shareholders,” Jefferies note said.

The company’s CEO, Katsuya Nakanishi, hinted at potential future investments in the United States, a market he views as promising due to its high energy and food self-sufficiency. However, the outcome of the U.S. election could impact these plans.

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Despite the Nikkei index’s 0.20% dip, Mitsubishi’s performance on Wednesday was second only to GS Yuasa Corp GYUAF, which saw a nearly 20% increase.

As of June 2023, Berkshire Hathaway held 8.3% of Mitsubishi’s stock.

Why It Matters: Mitsubishi’s record-high share buyback plan comes on the heels of its strong financial performance. The company posted a record net profit last year, driven by a surge in commodity prices following Russia’s invasion of Ukraine.

The company in September decided to cease automobile production in China, a move attributed to the rising popularity of electric vehicles and strong local brands.

Notably, Mitsubishi’s decision to allocate its surplus cash to shareholders is in line with the trend of Japanese companies becoming more cautious about overseas investments. This shift is attributed to the possibility of policy changes under a new U.S. administration, as evidenced by Donald Trump‘s pledge to block Nippon Steel Corp‘s NPSCY planned purchase of United States Steel Corp X.

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