In early 2021, a portfolio manager of Johnson & Associates, Mark Johnson, was reviewing his holdings, including his position in Key Corp (KEY). A prominent shareholder had begun liquidating his position in KEY and Johnson was concerned that the shareholder's reduced position could lead the company to stop using share repurchases as a method of distributing cash flows to shareholders.

Assume Johnson's role as an analyst and assess the likely impact of the alternative uses for cash flows and the likely impact of those alternatives on Key Corp's stock price. The central question for students to resolve is whether share repurchases influenced stock price performance of if the correlation was spurious (i.e., there is an association but no casual link between stock price performance and share repurchase activity).

1. How has Key Corp's stock price performed over the past three (3) years? What other financial measures can you cite that are consistent with the stock price performance?

2. How does a stock repurchase work? Why would a company use this tactic? What impact does it have on earnings per share? Return on Invested Capital?

3. How much of Key Corp's stock price performance should be attributed to the share repurchase program?

4. Assume that Key Corp is planning to stop its share repurchase program. What would be the best alternative use of those cash flows? Why?

5. What should Mark Johnson do about his holdings of Key Corp shares?