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Be
haven't time for your ballacks atm
So the market cap is say £20b
they have 2 business worth say £3b of that £20b. They sell them for £4b, the SP for that transaction should increase the market cap by £1b all things being equal (the market isn't, I get that, so don't need to keep telling us, its for illustration)
If they decide to buy back shares to the value of £4b then if that was achievable in 1 day then the market cap drops by £4b, so now worth £17b (£20b + £1b less £4b). / fewer shares would result in a higher SP, but because of the sale not the buybacks,
However, liquid float and supply and demand will kick in, if there are fewer shares to be bought and sold it should create a premium which should translate to an increase in SP, hence why my numbers were based (for illustration...) on it all being bought in 1 go
Be
''we are selling under performing assets, that cash is going into the business, that would then theoretically be adjusted in the SP''
what? - the assets are already reflected in the share price
''What they do with that cash ...................''
we know what is being done with the cash - an investment in Vodafone shares
I’d say the lack of a response says they can’t find any way to respond to those key disadvantages for users and businesses. Which means they won’t get clearance from the CMA, I guess.
With the cost of living crisis being so high in people’s minds right now, I wouldn’t be surprised if both 3 and Vodafone have decided to put the Idea on a back burner.
Dan
''L.T.I. If vod buys back 4 billion euro's of shares & cancel them, the market cap will reduce by 4 billion euro's.''
oh dear oh dear - I am not going through this in detail with yet another person.
The market cap will be whatever the market decides but it will not be 4 billion euro lower because of buybacks
''all companies would be be buying their own shares back ''
all companies should purchase their own stock if they feel it is way undervalued and is a better investment than elsewhere
Apple etc etc etc have done very well buying their own stock since flotation
But to add I 100% agree the SP moves for a myriad of reason's, but if you think the NAV has zero value to the SP then all fool you!
Obviously to much text, so might as well ignore the last sentence as I'm not typing it again but was a different way of saying what I already had, but Knowing LTI he wont get it anyway, but word it in a way that makes everyone else look stupid
Thats not what happens though
we are selling under performing assets, that cash is going into the business, that would then theoretically be adjusted in the SP (or before as the RNS is released and the market comes to expect it will happen)
What they do with that cash is then an entirely separate transaction. does it stay in the bank and contribute to the NAV (which may or may not correlate to the SP), do they invest it in markets where they achieve greater than the cost of the capital, to enhance future cash flows which again should corelate to an Increase in SP. Or do they spend that money on shares for cancellation, which in isolation reduces the NAV (and perhaps any under / over that the SP is against the NAV).
One theory on SP is the DCF valuation basis. at present the discounted cash flows for the divestments are £
Dan
''but this is cancelled out by the cost of buying those shares.''
nonsense - the value is transferred to the remaining shares.
''It depends whether the vod sp increases after the buy back or not. ''
what is all this 'after the buyback' ?
each days purchases has an effect, even if unnoticeable day to day.
''if we knew the shares were worth & could realise an sp of £1, but we don't know''
the market says they are worth 70p per hare - it is up to the individual investor whether they agree with that or not.
Boe1
''if the company is worth ''
the company is worth whatever the market determines on a daily basis. Selling assets which make no return and investing the proceeds in Vodafone shares for cancellation will increase the relative price per share over what it would otherwise be.
Why can't the CMA see that the merger needs to go ahead to ensure the required investment in 5G infrastructure. We're bottom of the pack on 5G speeds and continued poor ROE across UK communication firms is not going to solve that. 3/Vod would be in a much better position to invest in the required infrastructure. Sure consumers will pay more, but you get what you pay for. If they want UK businesses to have poor communication infrastructure than foreign competitor then fine, but I doubt that will be do our economy any good.
https://www.ft.com/content/2f202d15-d1ae-40bd-83f5-e0ad3a786c49
L.T.I. If vod buys back 4 billion euro's of shares & cancel them, the market cap will reduce by 4 billion euro's. The 4 billion euro's comes out of the market cap. If you were right, all companies would be be buying their own shares back & we would all be miyanears Rodney. It doesn't work that I am afraid.
Department of lets wreck britain holding this share back with their interference
It knot lookin goode agane sadley.
Knot shure wy, mite be Merica.
I has give up all hoppe wiv this share.
I is knot sure if I is afrade it mite knot evver looke goode agane sadley.
In theory vod share buy backs should not make any differance to the share price in the short term. The gain is, each share owns a higher proportion of vod as there will be less shares in circulation, but this is cancelled out by the cost of buying those shares. Buy backs are an alterative to paying off debt. Mole would argue paying off debt or reducing the divi as better, the vod management prefer to buy back which I agree with. It depends whether the vod sp increases after the buy back or not. If increase then the buy back is good. If the share price is 70p, it is no more likely to increase than if it is £1. Of course it be better to buy vod at 70p if we knew the shares were worth & could realise an sp of £1, but we don't know. If we did ,we would all mortgage our houses & use our life savings to buy vod at 70p today.
Took a tumble at 2:30pm. Looks like the Yanks woke up and attacked!
No increase in SP till after the buybacks benefit Vodafone and Long Term investors predominately, mainly due to the reduced cash dividend value for Vodafone and the "ability" to turn that cash into growth.
For short term investors with the exit set at a certain price then the quicker the better, as they can exit and move onto other things sooner (and potentially make another profit elsewhere, assuming the exit price is where they think the ceiling is). For short term investors looking for capital appreciation then they won't care what the future share count is for vodafone. But it 100% "should" be an enabler to a higher SP, but theoretically if the company is worth £19b now and they use £2b to spend outside of the company its only now worth £17b, so the SP doesn't immediately compensate. But if the FCF continues or improves then over time / less shares should correlate to a higher SP.
Cue LTI arguing with me again :-( in
3
2
1
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Rob
the share price won't be higher if the market values Vodafone at £17.4 Billion at the end of the years compared with the current £19.4 Billion.
Market cap of course may be higher than that currently, which would add to the benefit of the buyback.
LTI, why didn't you sat that before lol, that's what we want is for the share price to rise before next years dividend drop, at least then you will have the option whether you want to hold or sell
£1.71 Billion would remove getting on for 9% of shares at the current price, but of course prices will fluctuate on a daily basis during the buyback programme period.
Rob
the share price will rise this year on a maintained market cap by the percentage removal of shares that 2 Billion euro can make
LTI, If we had a decent rise in the sp this year before next years reduction in dividend yield, that would be something else to think about
Dan
If the market cap stays the same, then purchasing 4 Billion euros worth of Vodafone shares
WILL increase the share price by a percentage related to the amount of shares that have been removed.
Dan
''but there is no guarantee the sp will rise after the share buybacks.''
there is no guarantee that the SP will rise at ANY TIME, so the lower the purchase price the better.
''It is a bit like having a bet on football team, then hoping the other team scores so you can have another bet at higher odds on your team.''
?? weird. NO it's not -it's like purchasing 43% more shares with the money
'T'hat would be crazy. ''
crazy?
Personally I find that buying low and selling high not to be crazy
I think most vod shareholders want the sp to rise as soon as possible, as rob says, a bird in the hand is worth 2 in the bush. If the sp stays low untiil after the share buy backs then vod gets them cheaper of course, but there is no guarantee the sp will rise after the share buybacks. It is a bit like having a bet on football team, then hoping the other team scores so you can have another bet at higher odds on your team. That would be crazy. Unless of course you have a crystal ball.