What happened
Shares of Stellantis (STLA 0.69%) jumped 15.2% in February, according to data from S&P Global Market Intelligence, after the automaker posted an 18% jump in revenue in the fourth quarter and announced it was buying back 1.5 billion euros worth of stock, about $1.6 billion at current exchange rates, with the intent to cancel shares.
The buyback program is expected to be completed by Dec. 31. Stellantis has 244 million shares remaining on its current repurchase authorization, which means there are sufficient shares allowable to complete the stock buyback as well as repurchase the 99.4 million shares owned by its Chinese joint venture partner Dongfeng that was authorized last July.
A Dodge Ram electric pickup. Image source: Stellantis.
So what
By canceling the shares after repurchasing them, Stellantis will help ensure that the value of the remaining stock in shareholder hands is a larger piece of company ownership. It will also have the effect of inflating earnings per share since every dollar of profit is distributed among fewer shares.
Stellantis, which owns the Dodge and Jeep brands, reported revenue of $191.2 billion as electric vehicle (EV) sales surged 41% from the year-ago period, hitting 288,000. It wants to double the number of EV models it offers for sale to 47 by the end of 2024, and it wants to sell 5 million EVs globally by 2030.
In response to its strong performance, Stellantis will not only buy back $1.6 billion worth of stock, but it will also distribute $4.5 billion in dividends to shareholders.
Now what
To help achieve its global EV ambitions, Stellantis also announced it was investing about $150 million in an Argentine copper mine owned by McEwen Mining (MUX -1.62%) that would give the automaker a 14.2% stake in the miner.
Stellantis says the purpose of the investment will be to help ensure it has an adequate supply of raw materials for its growing EV fleet and to meet its goal of a net-zero carbon footprint by 2038
The availability of raw materials needed for all the EVs that carmakers have promised is a potential high hurdle to surmount as Tesla alone would consume all the world's supply of certain raw materials if it achieved its own goal of 20 million EVs by 2027.
