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Thank you Mole, Cesna
'the next bond converts in March '22. Approx 1.5bn shares will then be issued causing approx 5% dilution again.'
Is the 2nd tranche likely to be bought back in the same way as the 1st tranche.
I can see in June RNS, 'Vodafone has generated net proceeds of U.S.$2,432,850,000 from the sale of the hybrid securities. Vodafone intends to use these net proceeds for general corporate purposes, which may include funding repurchases of ordinary shares issued in connection with the £1,720,000,000 1.50% Subordinated Mandatory Convertible Bonds due 2022.'
Hi Android.
At March 1st, before the first convertible bond was converted, the share float was 26.8bn. Your figure from April 1st was after the bond shares had been issued to settle the bond. The count today is 27.4.
With continued buybacks, they may remove the current dilution by the time the next bond converts in March '22. Approx 1.5bn shares will then be issued causing approx 5% dilution again. They can spend the next year buying those back.
Android,
'If there was dilution, wouldnt the total increase, not decrease?'
if you look back to March the number in issue (with voting rights) were lower and if you held then, your rights are currently diluted. If you buy this week, the buybacks will increase your rights as the market works toward 'no dilution'. In either scenario you get the dividend but obviuosly you can buy more stock today with your money than you could in March so you get more dividend.
Mole, thanks.
'get share float back to March '21 level'
At 1st April, the total number of voting rights in Vodafone was 28,224,193,469.
At 1st October, the total number of voting rights in Vodafone was 27,540,979,833.
If there was dilution, wouldnt the total increase, not decrease?
Still trying to understand this..
fleccy. I can't make any sense out of Umeed's posts. I think he is desperately trying to ramp the vod price any way he can. The share buy back is very complex of course, but basically it is to stop dilution. The obvious way do that is to buy back, then cancel, meaning there are less shares in issue. Basic stuff really? Some on here need to go back to school to learn basic mathematics!?
RichTheNewbie. 2nd half of my post simply means that a if you lose7% from your investment capital,(loss in share price) then that wipes out the 7% divi. That's not difficult to understand is it?
Dan - it was a bit of hyperbole but dividend investing is hardly a big mistake. It’s very much out of fashion these days though. In the era of money printing that’s probably hardly surprising. Not got a clue what you’re trying to say with the second half of your post :p
RichTheNewbie. If the only reason anyone invests in Vod is for the divi, then we could all be in trouble!? Investing for the divi only is obviously a very big mistake, lets hope vod has more to offer than just a big divi, It needs profits etc. A 7% divi does not equate to 7% equity as some have suggested. Equity = divi, plus or minus, variation in share price.
kerching - this has been an absolute dog of a share and each time you try to avae down it goed down further, however it does seem that the divi cover is rising, though still not over 1....
Kerching,
You should do your research properly.
They reached 238p on Jan9th 2018. They cut divi by 40% on May 16th 2019.
I sold out at 235 and have been buying back since 180p..too early.
jr
US mobile operators have had a couple of bad weeks after Barclays downgrade, but it seems to be bouncing back, so is Vod!
LoL, anywat they already reducing net debt and €14Bn profit to pay divs and interest on debt. Any monies keft can be used for growth capex, probably africa
Balls to that. The only reason anyone invests in a giant like this is the dividend.
After the steady decline in the share price over several years, mirrored by the decline of the net asset value of the balance sheet, surely it's about time that the Board realised that by paying a huge dividend each year isn't doing anybody any favours. The only way that the company has been able to pay a dividend that's been higher than profits for many years, is by increasing borrowings. Given that debt is one of the company's biggest problems and that much of it has arisen due to the overly generous and arguably bizarre dividend policy, the only responsible action should be to suspend dividend payments and allow debt to reduce and the balance sheet to recover.
To continue with the current policy is reckless and irresponsible and the Board needs to realise that or be replaced.
Conversion price of £1.13, not euro.
The conversion price takes into account dividends paid over the period of the bond that the bond holders missed, so the next March bond will convert around €1.13, assuming next div is not cut. Approx 1.5bn shares will be issued. Current buyback speed will take several years to get share float back to March '21 level of 26.8bn shares, so holders will have to endure dilution on some level over that period.
'they'll have to await share price recovery to avoid said capital loss'
Then, does Vod have to short itself to avoid dilution?
"The difference will be cash banked by vod with each buyback?"
Indeed, the investors in the MCB's will suffer a capital loss if they sell on maturity while the share price is depressed. On maturity if the MCB investors have any sense, they'll have to await share price recovery to avoid said capital loss.
Fleccy, my understanding is 27bn in your example. No dilution.
I would like to understand it too so in principal, I think Vod will have earned the price they sold forward the mcb, say £2.2 per share less the cost of the derivatives contracts and the current SP say £1.1.
The difference will be cash banked by vod with each buyback?
"Soon, Vodafone would flood the market with over a billion Vodafone shares (whatever they bought over months) to retire Convertible bonds. So, whatever Vod shares Vodafone is buying, it is to get released to market in near future.
If Vodafone is buying to stop dilution, then they have to cancel treasury shares, but they are not."
Umeed, I don't understand your interpretation of what's going on. Maybe I'm misunderstanding the situation.
I'll use rounded figures to demonstrate my understanding:
Lets say that Vodafone have 27 Billion shares in issue.
Vodafone offer an MCB, at a certain share price, for 3 Billion shares.
Vodafone then have two choices:
Buy back the shares and give the 3 Billion purchased shares from treasury, which means there will still be 27 Million shares in issue.
Create 3 Billion shares and pay in newly issued shares, meaning 30 Billion will now be issued.
Because the issue price is higher than the current price, and Vodafone can afford it, it makes more sense to buy the shares now and hand over the Treasury shares, rather than creating new shares upon maturity.
Since Vodafone are currently buying back the shares, on MCB maturity there will still be 27 Billion shares in issue, so no dilution, or am I misunderstanding it?
It's the enterprise value that matters when you value a business ie steuctured debt plus equity not just debt in isolation
It makes sense fir a high gearing when debt is so cheap and the shareholders return from the debt is higher than the cost of debt
Read up educate yourself
Actually, Vodafone is not buying shares to keep share price up, share price stable or save shares from dilution.
Soon, Vodafone would flood the market with over a billion Vodafone shares (whatever they bought over months) to retire Convertible bonds. So, whatever Vod shares Vodafone is buying, it is to get released to market in near future.
If Vodafone is buying to stop dilution, then they have to cancel treasury shares, but they are not.
It depends on how one look at things, but what I see is that, Vodafone is repaying their debt slowly (using cash flow) what Vodafone took through convertible bonds. Over months, if Vodafone buy enough shares to redeem convertible bonds, then it means, every day when Vodafone buy own shares, they pay a part of convertible bonds
If Vodafone has cash problem and needed more cash as loan, the easiest way is to not buy shares for redeeming convertible bonds, but issue new shares at time of conversion to redeem convertible bonds, what Vodafone is not doing ... shows that they are not in any need for cash or expect need to borrow in near future.
As for share price going up and down, that is immaterial for those who bought Vodafone shares to be part of Vodafone business. They should be happy that their company is paying off debt using cashflow, what they borrowed using convertible bonds, and not relying on issue of new shares (to redeem convertible bonds).
Dan, Re: (precious" vod shares), not sure about that one mate, the time for ramping is when the sp is rising, not when its dropping, my Lloyds bank shares are doing well right now with the hint of a rate increase, but nothing much else is to be honest, as much as I would like to offload my vod shares, selling at these prices don't make much sense to me, so lets just hope we get some good results next month, , things will get better at some point, but still some difficult times ahead for a while i think
best of luck
Hi Dan, I was replying to umeed and agreeing debt no problem.
Android. You say you agree, but you didn't say what you agree with? Was it the the subject? Too much debt etc, if so you make no sense.