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Nice to see this breached. Pension funds are doing their clients no favours by the posturing over oil.
well its been a brilliant start to the year on the shell share price , despite no special divi. things looked bleakb4 xmas, yet once again SP has shot up. with the BB have been put in place, but hopefully can push share price onto £18 50 + b4 results. whisper it , but im happy.
https://thewillnigeria.com/news/bid-for-acquisition-of-shells-onshore-assets-in-nigeria-begins/
Also must have something to do with not looking like money is falling off the trees when consumers are looking at doubling their fuel bills and Gov are being goaded into a windfall tax for oil and gas to support suspending the consumer based green taxes
Brent Crude is flying on fed news. Think this has more to run.
Still watching closely the following target to tell me that it has changed to Upward momentum again.
1788.20 made on 25/10/2021 then retreating to the Low 1629.40 on 03/11//2021
So let’s see what the follow-ups hold
boyobach, I think all agree in fact, it's just that you worded it badly.
It is important to look at how the funds for buybacks are generated, if the money comes from selling an asset it makes the company smaller therefore the fewer shares will be worth the same as the company value is also smaller, the exception is when a profit or loss has been made on the sale. If the buybacks are funded by profits you have fewer shares but the company value stays the same, the individual shares should then be worth more.
Buybacks aren't necessarily a bad thing - if the shares are undervalued - but don't kid yourselves that when they are linked to a significant asset sale they are not part of a reduction in company size, even if it is small in the big scheme of things: Permian is gone and there'll be fewer shares in issue as a consequence, therefore the company is smaller. Whether the market cap correctly adjusts to account for the $7Billion of assets coming off the books is up to the market. As there'll be fewer shares then the sp would need to increase proportionately to maintain the market cap at pre-buyback levels.
If the distribution had been in the form of a special dividend then the sp would have fallen on ex-div day. However, with buybacks the effect will be spread and less obvious whilst other factors (like rising OP) may mask it further.
I get it - some here obviously don't. And I'm done with explaining the obvious.
Boyo.... you say
“Taken to the extreme, Shell could theoretically sell the entire company and buyback every single share with the net proceeds.”
Hope I own the final few hundred shares in that scenario.
What price do you think I might be able to command for each one given I then own Shell in its entirety?
Think you might want to review your understanding of buybacks I’m afraid.
"The first thing you know Old Jed's a millionaire"
https://www.upstreamonline.com/exclusive/updated-shell-finds-oil-with-closely-watched-namibian-wildcat/2-1-1142213
Yes,
I saw it reported somewhere yesterday but no official confirmation yet
Whilst I could see the attraction of buy backs for a company with no debt, no opportunities for acquisition, no opportunities for R&D or E&P and no forecast need for borrowing. ie there really is nothing else to do with the money other than a special dividend; Shell is not in this position.
If the buybacks lead to a Share price uplift (which I think is the aspiration) then I guess remaining shareholders do own a greater percentage of a company which is now valued at a greater amount (accepting that cash has left the building - as the market value is not necessarily the sum of the assets).
Think its more to do with two things:
Messing about with EPS and RoE etc - figures all magically look better and thus should attract more investors (Director targets / bonuses perhaps!)
Not raising a dividend you may later have to cut (Shell have been burnt by this)
Guess there is always the option to re-issue the cancelled shares to raise capital cheaply.
Lots of big companies do it so some must see a benefit.
Boyo,
I think you seriously misunderstand how the stock market works I am afraid.
The market cap has nothing to do with the number of shares it is divided by.
In theory, each buyback should have an equal effect of the SP.
For example. I have a company worth £10, with 10 shares in issue. Each share is worth £1. I now buy 5 shares and cancel them. My company is now still worth £10, but only has 5 shares in issue, each of value £2.
Sorry to use such a kindergarden example, but I think this is what is required here to explain to you what buybacks mean.
The buybacks mean we own a larger share of the same size company......
Sorry but that's very obviously nonsense.
When Shell buys $10m of shares and then cancels them the company is obviously $10m smaller in value.
Shell does not now have the Permian asset and, after buybacks, it won't have the cash either: therefore it is smaller!
This does reduce the number of shares for dividend distribution but it proportionately reduces the net assets that generate the profits from which those dividends are paid.
As Getafgrip rightly says, once cash leaves the company it is gone.
A dividend shares it out between all investors whilst a buyback (where the shares are cancelled rather than held in treasury) simply shrinks the company and the number of shares in issue. It's not rocket science.
Taken to the extreme, Shell could theoretically sell the entire company and buyback every single share with the net proceeds.
Is there any news from Namibia ? There are rumours Shell has oil find !
Is it a leak or false news
I don't think that's right. The buybacks mean we own a larger share of the same size company. More over, the company retains more cash as there are less shares to pay dividend on. Meaning there is more left over to pay those who still hold.
'Buy-backs are an excellent way of keeping that capital invested in Shell plc. .....'
Unfortunately I don't think that is the case.
If the acquired shares are cancelled - as I believe is the intention - then, no, the capital simply goes into the pockets of those that sold them and the company gets proportionately smaller. Remaining shareholders then simply own a larger percentage of a smaller company. In theory, if the sp truly reflected the net realisable value of the company per share, buybacks would have nil value to the remaining investors. A buyback 'distribution' has no material value to shareholders unless the buybacks are made when the shares are undervalued and the process results in an enhanced sp.
Yeah I was wondering on that one too, only one report on it at present.
Brent turned South at the same time.
But if you're looking for positives, the percentage falls on Dow and Brent Index were both higher then the fall in RDSB price - so I guess it could have been worse.
... then the DOW opened!!!