Here today; here tomorrow. Salesforce CEO Marc Benioff’s stock buyback will saddle the company with debt until 2066, when he turns 102 years old.
Benioff announced plans to repurchase $50 billion in stock during the company’s February 26 earnings call, with half of that being financed with several batches of notes that will start maturing in 2028, and will require Salesforce to make repayments for 40 years.
“These are great prices, I'm sure you would agree with that, and we want to use our capital correctly, and I think debt is a great way to do that,” Benioff said while explaining the rationale behind the buyback during the company’s Feb. 26 earnings call. “And I think our stock is at a great price, and I want (CFO) Robin (Washington) to buy as much of it as she possibly can.”
During the call, Benioff said that he saw current economic turmoil as a buying opportunity. He said the company was also not using debt effectively and sought more of it, as Salesforce appears on track to generate about $16 billion in free cash this year.
On Monday, Salesforce announced that it had started the buyback process taking in 103 million shares as part of the accelerated share repurchase plan. That represents 80 percent of the total shares it has committed to buy back, the company said.
Salesforce plans to buy the remaining shares in the "third or fourth quarter of FY27.”
Benioff said Salesforce stock had become diluted through the 2021 purchase of Slack for $27.1 billion, and its 2019 acquisition of Tableau for $15 billion.
The CEO’s comments came as investors have been pummelling Salesforce’s share price amid worries that AI coding tools, and AI-enabled automated workflows, may make software vendors less relevant to users. The pullback of capital from those markets led to billions in losses from the market caps of software bellwether stocks such as Microsoft, Oracle, SAP, Salesforce, and ServiceNow.
Salesforce stock has rebounded nearly 8 percent since last month, but is still down 45 percent from its December 2024 high.
The dramatic downturn has been labelled the SaaSpocolypse, a label that Benioff derided.
“This is not our first SaaSpocalypse. We have been through many SaaSpocalypses. I remember the horrible SaaSpocalypse of 2020 when not only the software industry was dying, but we were all dying, but we made it through that,” he said referring to the COVID-19 pandemic which has killed 7.1 million globally. “And now everyone is back, doing great.”
To fund the buyback, Salesforce last Friday announced the sale of $25 billion in bonds – underwritten by J.P. Morgan Securities LLC, BofA Securities, Inc., Barclays Capital Inc., Citigroup Global Markets Inc. and Wells Fargo Securities – with the first set maturing in 2028 and the last $1 billion maturing in 2066.
Salesforce is not the only SaaS company to see the SaaSpocolypse as a buying opportunity.
Its competitor ServiceNow also announced a $5 billion repurchase plan for this year. ServiceNow CEO Bill McDermott himself recently bought $3 million and has vowed to not sell any shares.
SAP has also announced a plan to repurchase $11.5 billion of its shares.
Smaller players are running the playbook, too: Okta announced a $1 billion repurchase, and Snowflake also plans to spend $1.1 billion in buybacks. ®
Source: The register