London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
"Buybacks have NOTHING to do with what the market values a business at (market cap). "
Perhaps not in all instances but if a business uses a few billion Euros it gained from a one off asset sale, rather than cash it generated, to buy back the shares, then clearly it will be valued at less.
Rob
'' let's hope it can change direction''
that is the hope of the reset - selling non performing assets whilst they still had some value to someone, reducing the dividends and investing in the remainder of the Vodafone business that give a return via buybacks
Totally incorrect
There are many factors that are use to determine SP, and 100% a companies NAV and DCF estimates play some part in the SP value. To imply otherwise is disingenuous at best, and plain stupid at worst. So which are you LTI?
LTI, well i will give the thumbs up for whatever pushes the share price up, whatever it may be, you know full well this has been going in the wrong direction for far to many years, let's hope it can change direction
Rob
''Lloyds have done massive buybacks, ok the share price is up at the moment, but not sure if the buybacks can take any credit for that''
Lloyds is my 2nd largest holding after HSBC
Buybacks have NOTHING to do with what the market values a business at (market cap).
The sole purpose of a buyback for cancellation is to reduce share capital.
The reduction of shares in issue will mean that the price per share will be higher than it would otherwise have been.
A share price could be lower as well as higher after shares have been removed from the market - determined by the valuation that the market places on the business.
Dan, shall we stick to our old and trusted formula, if the share price is going up it's good if down not so good, unless? we won't go there,
Lloyds have done massive buybacks, ok the share price is up at the moment, but not sure if the buybacks can take any credit for that, I think fleccy is right, the markets players will decide on the price depending on sentiment
Dan
''You don't get it do you?''
I think it is you - if same valuation - fewer shares = increase in price per share
I'll be glad when the kids go back to school next week... Yawn
Share Buybacks increase the Earnings Per Share and where dividends are paid it reduces the dividend bill. Theoretically the market analysts should look favourably on a higher EPS, which should feed through to an increase in the share price, but market valuations are currently driven by narrative and momentum, not fundamentals. As an example Lloyds was 41.19p on the 13th Feb and is currently 53.96p, an increase of 31% in 2 months; Lloyds share price increase isn't being driven by share buybacks, it's being driven by a narrative change around the banking sector and momentum.
The analyst community have been bashing Telecom sector stocks for a long time, at some point the narrative should change and the prices should benefit from the same momentum phenomena that's benefited other stocks and sectors.
FTSE Blue chips shouldn't move 30% in a few months on the back of nothing, it highlights how the market players/gamers can move stock/sector prices just because they decide to.
Beo. It might be time to give up on L.T.I. He has not got a clue what he is talking about. He thinks it is all ballack's, that says it all. Have a good week end mate. Bad finish today though. Shame about that, but I plan to top up on Monday.
L.T.I. As you say, the value is transferred to the remaining shares, so vod spends 4billion which is transferred to the ramaining shares so ends up level. You don't get it do you?
I'm guessing your response will be along the lines of the market cap is whatever it is? as yes that is correct. But that also goes for what your trying to say. EG "the buyback will increase the SP" but you can't say that even if your theory was sound, because, you guessed it, "the market cap will be what the market cap is"
Honestly you talk so condescending to anyone offering a different opinion. Like literally your right and numerous people are wrong? and you put it in a way where unsuspecting people might actually believe your codswallop because of how belittling you are.
Do you chuckle to yourself every time you spell the ID differently, do you get off on that, its a mild annoyance at best, just weird as again highlights your narcistic side, and you need for control of the situation.
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