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Thanks G Smiley for your reply.
@james/ed
The tender price is fixed at 80p. See the last RNS:
"the Tender Price will be fixed at 80 pence per Share which represents a premium of approximately 10 per cent. to the mid-market price of a Share at the close of business on 15 July 2019, the latest practicable day before the printing of the Circular"
My only experience of a similar situation was with REC and my thought process was they must think this company is going places, but it didn't progress as they thought, the growth didn't materialise.
So you can never tell is my opinion, it comes back to the bottom line profits and growth if these don't occur then the sp will drop back.
Management is upbeat and we are in recovery mode, I have thought about taking profits and if it rises accept I buy back in at a higher price, if the price falls buy back in at a lower price that's the choice.
Its a trade in circumstances, interesting because we are at 80p to sell now, is this the glass ceiling or can it break through and if it does is the tender doomed to fail.
Still lots of time left to ponder before the deadline.
No reason for a cap at 80p? In fact the share price has already exceeded that.
Am I correct in saying that the Tender Offer price can be increased to attract more sellers if necessary?
@LZ - there are a couple of things in your post which you may want to review.
1. There is no reason I can see why there should be a cap on the sp of 80p. The sp will be determined by the market. If the proposition that "the shares are undervalued therefore buyback" holds water then it is entirely possible that the tender will "fail" as the sp, which is in a rising channel simply carries on rising.
2. As an LTH, I would regard a steady as she goes update in September as good news as it supports a good divi yield etc etc
3. The current rise began in the first week of June and the sp had risen by over 50% by the close on the day before the RNS announcing the tender.
4. I have no firm idea what the "natural price" of XML is although I hope/think that it is should be more like 200p which is a lot higher than today. Assuming I am even halfway right then I can see no reason to stop it going past 80p in the next month.
5. Of course, there may be a retracement because of the size of the rise to date but I am no trader and (from the above) hold XLM for the long term.
So if I put the above together, I think the risk in your strategy is that the assumption in your opening sentence may prove incorrect. If so, you will be selling into a rising market and may not see the 70's again. Not relevant for me as I am holding and adding on dips and my average is way below the sp at present. Just sayin'.
GLA
GS
I bought at 48p and just sold on Friday. I expect sp to drop over the next couple of weeks & i am happy to get back in if it does
This buyback proposal has put an 80p cap on XLM shares for the next month. Looking at transactions over the last couple of days, it seems that I could sell my entire holding for something between 78.5 and 79.2 - which, even allowing for fees, is a discount of 2% against selling roughly 10% of my holding for the 80p commission free offer price.
So, depending on your view on what will happen to the XLM share price on 23 August, there could be an opportunity. I’m not sure that’s there’s a good deal of data on past occurrences (with other companies who’ve done the same thing), but my instinct tells me that there will be a SP drop to its natural price until the company’s half-year report in September. From the trading update, there didn’t seem to be anything other than “trading within expectations”. You could make the case that nothing other than the buyback offer has increased the share price from c.70p to 79.5p, and therefore the SP will fall back to low 70’s as soon as the Tender Bid has become effective.
With low transaction fees/commissions, a buyback price of 76p or less would make this a profitable strategy. At worst, I’ll have lost c.2% for getting this wrong, and I can live with that.
Can anyone make a case for XLM’s SP accelerating upwards from 80p post Tender?