Chris, I think you'll find I haven't suggested anywhere that the sp will be moved a pretty insignificant buyback (half a percent of market cap). And certainly not in the short term. I think this fixation with this tiddly buyback is out of all proportion to its significance.
Chris, well spotted that the repurchased shares are being held in treasury and have not so far been 'retired' or cancelled.
But, being in treasury does mean that they are not entitled to the dividend and neither do they participate in the EPS calculations etc. So all the various calculations that have been discussed still hold I'm afraid.
The only real difference between being in treasury and being cancelled is that they could be issued again without having to be created anew ... and that does bring into question why a board might wish to keep them hanging around.
If I were overly cynical or Machiavellian I might think that they might be going to play a part in the soon to be revised incentive plan that is up for the EGM on the 23rd -- which reminds me that I had better read the details of that ...
And Liberalman, suggesting Dividends and buy backs move the SP the same is not a good analogy for me. This would only work if the market was efficient and added the correct value to the shares repurchased. The market is clearly not efficient in any way or else a FTSE250 company like this, with our balance sheet would not be yielding nearly 9% dividends which is ludicrous.
I note your comments and think that you both have valid points. I am not sure that you have not both overlooked something at this time however. BKG have purchased the shares HOWEVER if you read the RNS you will see that every one so far mentions the fact that the shares are actually held in treasury. Currently ALL shares are due a dividend, there are no increase in earning on a like for like basis and no shares have actually been cancelled mearly purchased.
I think you both have points. Generally when an organisation buys ou 0.1% of their shares and cancels them the effect on the share price is negligible however you loose your dividend.
I think the acid test is the quantity of the buy back and the end use of share. A small drip feed of shares held in treasury will not be likely to move this share price at all. Given the boards strong return to share holders I would hope the intention is to increase the buyback and announce a substantial canelation of shares. This would be similar to what Next have done and has worked well.
At the moment I do not believe the buy backs are of sufficient size and I do not believe it is correct to hold in treasury beyond resuts day. I think the fear of investors that they will be used to reward directors as share bonuses is not accurate but it is certainly a perception that can reign in the current method they are using...
Sadly more assumptions ... leaving aside the personal ones again ... you assume an efficent market place and sadly that's not what we have. Who says that the shares will be worth the 33.33% more than they were before the 25% were bought and cancelled? you? the market? some broker? ... they could be worth almost anything, less, more, the same. The dividend is set and fixed (leaving aside currency issues perhaps) and paid. That is my point ... I don't have to trust Mr Market to maybe make up the shortfall that I need.
Further I may choose to reinvest the dividend in this company, I may hold and reinvest later at a different price, I may choose to invest in another company altogether, I can spend it. The point is I have a choice ... with buy-back I have none.
As for the mathematics, there is actually a very small advantage to the buy back if we assume a perfect market and no dealing costs. But it is very small, and sadly selling small numbers of shares is not efficent either in terms of dealing costs or time. Mathematically it may look the same ... in practice it's rather different.
As I keep saying, for me as in income investor buy backs are not good news ... there's some hope for this particular buy back scheme as I've mentioned before, but I'm waiting to see how they actually do the numbers come the next set of results before buying or selling further.
Lol. You've clearly not worked it out have you? In my example... if you are happy to receive 50% of future distributed income rather than 66.6666%, you then sell the required amount of shares to bring in the cash. Mathematically it doesn't make a blind bit of difference. If on the other hand you had reinvested the 50% share of the 25 (i.e. 12.5), you would have ended up with... what?... a lolly if you get the answer right. Quite apart from avoiding any Dividend Distribution taxes that would reduce your divi income. Here endeth my Investment lesson. I'm done.
Leaving aside the personal taunts ... at best a buy back replaces the certainty of a guaranteed, assured monetary transfer of a dividend with the vagaries of the markets valuation of the share itself.
And I reiterate, that for myself, as a long-term income based investor, the replacement of income stream with hoped for (but not guaranteed) capital gain is not a good deal. For you it may be different, but for me it's not.
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