XP Announces Share Repurchase Program

Rhea-AI Summary

XP (Nasdaq: XP) announced the approval of a share repurchase program by its board of directors. The program allows XP to repurchase up to R$1.0 billion (~$200M USD) of its Class A common shares from May 23, 2024, to December 31, 2024. Repurchases may be executed in the open market or through private negotiations, subject to market conditions. The program will be funded by existing cash reserves and may be periodically reviewed, adjusted, or discontinued by the board. XP has authorized management to appoint a broker to handle the repurchase, potentially utilizing SEC Rule 10b-18 and Rule 10b5-1 safe harbors. The timing and volume of repurchases will depend on factors like market conditions and alternative investments.

Positive

• Approval of a share repurchase program up to R$1.0 billion (~$200M USD).
• Repurchase program funded by existing cash reserves.
• Board's periodic review ability allows flexibility in repurchase strategy.
• Potential utilization of SEC Rule 10b-18 and 10b5-1 for safe harbor in repurchases.

Negative

• The program's completion is subject to market conditions, which might hinder repurchases.
• No obligation for XP to acquire a specific number of shares, adding uncertainty.
• Potential suspension or discontinuation of the repurchase program could impact investor sentiment.

Insights

Financial Analyst

XP Inc.'s decision to implement a share repurchase program up to R$1.0 billion can signal to investors that the company believes its stock is undervalued. This action is often seen as a way to return value to shareholders since reducing the number of outstanding shares can potentially increase earnings per share (EPS) and drive up the stock price. The company plans to use existing cash reserves to fund these repurchases, which suggests that XP has solid liquidity and confidence in its current financial position.

From a financial perspective, this move also provides flexibility. As the company does not commit to a specific number of shares to be repurchased, XP can react dynamically to market conditions. This flexibility can be reassuring to investors as it shows prudent financial management.

However, one should also consider the potential opportunity cost. Utilizing cash for share repurchases means those funds won't be available for other investments, such as expansion or acquisitions. Investors should weigh this against the potential benefits of the repurchase program to determine if it aligns with their investment strategy.

SÃO PAULO--(BUSINESS WIRE)-- XP Inc. (Nasdaq: XP), announced today that its board of directors has approved a share repurchase program. Under the repurchase program, XP may repurchase up to the amount in dollars equivalent to R$1.0 billion (one billion Brazilian Reais) of its outstanding Class A common shares in the open market, based on prevailing market prices, or in privately negotiated transactions, over a period beginning on May 23^rd 2024 continuing until the earlier of the completion of the repurchase or December 31^th 2024, depending upon market conditions. XP’s board of directors will review the repurchase program periodically and may authorize adjustments to its terms and size or suspend or discontinue the repurchase program. XP expects to utilize its existing cash to fund repurchases made under the repurchase program.

The board of directors of XP has authorized management to appoint a broker for the repurchase program to purchase the Class A common shares on its behalf in the open market. Such purchases may benefit from the safe harbors provided by Rule 10b-18 and/or Rule 10b5-1, promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

The actual timing, number and value of shares repurchased under the repurchase program will depend on several factors, including constraints specified in the Rule 10b-18, price, general business and market conditions, and alternative investment opportunities. The repurchase program does not obligate XP to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time.

About XP

XP is a leading, technology-driven platform and a trusted provider of low-fee financial products and services in Brazil. XP’s mission is to disintermediate the legacy models of traditional financial institutions by:

• Educating new classes of investors;
• Democratizing access to a wider range of financial services;
• Developing new financial products and technology applications to empower clients; and
• Providing high-quality customer service and client experience in the industry in Brazil.

XP provides customers with two principal types of offerings, (i) financial advisory services for retail clients in Brazil, high-net-worth clients, international clients and corporate and institutional clients, and (ii) an open financial product platform providing access to over 800 investment products including equity and fixed income securities, mutual and hedge funds, structured products, life insurance, pension plans, real-estate investment funds (REITs) and others from XP, its partners and competitors.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as "expect," "anticipate," "should," "believe," "hope," “aim,” "target," "project," "goals," "estimate," "potential," "predict," "may," "will," "might," "could," "intend," variations of these terms or the negative of these terms and similar expressions are intended to identify these statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond XP Inc’s control. XP, Inc’s actual results could differ materially from those stated or implied in forward-looking statements due to several factors, including but not limited to: competition, change in clients, regulatory measures, a change the external forces among other factors.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240523249615/en/

Investor Contact: ir@xpi.com.br

IR Website: investors.xpinc.com

Source: XP Inc.

FAQ

What is the amount XP plans to spend on the share repurchase program?

XP plans to repurchase up to the equivalent of R$1.0 billion (~$200 million USD) in shares.

When does XP's share repurchase program start?

The repurchase program starts on May 23, 2024.

When is XP's share repurchase program expected to end?

The program is expected to continue until the earlier of completion or December 31, 2024.

How will XP fund its share repurchase program?

XP will utilize its existing cash reserves to fund the share repurchase program.

Can XP change the terms of the repurchase program?

Yes, XP's board may periodically review and adjust the program's terms, size, or may suspend or discontinue it.

What factors will influence XP's share repurchases?

Factors include market conditions, price, general business conditions, and alternative investment opportunities.