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'...The company uses its post-tax distributable reserves to pay for the purchase of its own shares.
If the company doesn’t have sufficient cash available, it cannot proceed with the buyback....'
It looks like DEC is living almost week by week, at best, on free cash flow.
'...Surely if they have given irrevocable authority then they must have handed over the cash at the time too, its not like PH are going to be buying on credit....'
You've answered your own question there, pickedpeck. No company (not even IMB or BATS or SPT, as a few examples of 'kosher' buybacks by reputable companies) has, for example, 10% of it's market cap in 'free cash' that it can hand over at the beginning of a buyback program. BUT it does have to remit enough cash to cover purchases that are to be made in the next day, week, month or whatever period they have cash to cover. Take a look at BATS, you won't see how much cash the broker has received from the company in advance, but you will see regular, structured buybacks on every single day the market is open. Compare that to the DEC piecemeal approach. BATS (and IMB and Spirent, even when Spirent had issued a trading statement reporting much reduced profits and poor outlook that led to a halving of their share price that they still had enough cash on hand to finance their buyback program) has cash, DEC doesn't.
Oh dear, oh dear - is my little reluctant little puppet going to have egg on his face - again!? LoL
# My reluctant puppet.
We have seen more than 5% shifts up and down in the last couple of weeks which inevitably pause the BB program. Its a tight set of boundaries and I am not sure why its there or what it is meant to achieve.
I doubt it. The text of the terms is in Resolution 17 of the AGM Notes
Diversified has today entered into an engagement with Peel Hunt LLP ("Peel Hunt") pursuant to an engagement letter under which the Company has issued an irrevocable instruction providing Peel Hunt with the authority to repurchase Ordinary Shares in the Company subject to certain agreed parameters...
17.2
to a maximum number of Shares with an aggregate nominal value of up to £951,368 (amounting to 4,756,842 Shares as at the date of the Notice) representing 10% of the current issued share capital of the Company, such amount to be reduced by the nominal amount of any Shares purchased pursuant to the authority in Resolution 18; by the condition that the Company does not pay less (exclusive of expenses) for each Share than the nominal value of such Share and the maximum price which may be paid for a Share (exclusive of expenses) is the higher of:
17.2.1 5% over the average market value of the Shares for the five Business Days immediately preceding the date on which the Company agrees to buy the Shares concerned, based on the share price published in the Daily Official List of the London Stock Exchange plc;
and
17.2.2 an amount equal to the higher of the price of the last independent trade and the highest current independent purchase bid at the time on the trading venue where the purchase is carried out,
I am making the assumption that the approval from the AGM is the only way the above terms would have been imposed on PH buy back. What's not obvious to me is why f they have to miss a day or three don't they start trying to catch up? Surely if they have given irrevocable authority then they must have handed over the cash at the time too, its not like PH are going to be buying on credit.
Now now GG, calm down dear - it's only a share bulletin board!! LoL
# My reluctant puppet.
Pickedpeck, these are standard terms and conditions. Once the buyback starts, the company has no say in how the broker carries out the buyback program, (hence significant market moves + or -, price limits, and of course IF the buyback target is achieved before target date). Assuming there's no news that would affect the share price, the company must maintain a hands off relationship with the broker. The only reason for a broker NOT carrying out the buyback per the agreement is a lack of funds forthcoming from the company.
It's a shell game. Can't afford to pay the dividend, due to lack of cash. Therefore declare a share buyback, to cover up massive cut in dividend due to lack of cash. Of course, maybe DEC just aren't very good at the paperwork, or something, as you tried to comfort yourself with as a 'reasonable' excuse, lol.
George, they wrote into the terms if the buy back that significant moves would pause buy backs, so a volatile price means buy backs stop.
I posted the terms here some time a week or two ago, basically price has to be within 5% of the 5 day closing average in order to buy back.
Without that pause mechanism I am sure PH would be buying every day, as it is they are not.
# My reluctant puppet.
'...My view is that they have signed a contract to outsource the BB to Peel Hunt and have put terms in kt that are making it misfire...'
pickedpeck, I'm surprised you don't know that the exact opposite to your guess on the mechanics of buybacks is true. In the case of buybacks, the rules are very strict, and there's no room for bespoke contractual terms and conditions between company and broker.
The obvious answer is : Companies need to lodge the cash for buybacks, no cash = no buyback. Compare to a fully funded buyback like BATS, or IMB.
DEC just doesn't have the free cashflow it claims to have.
Off the topic;
Does anyone know what I have to do with Form 1042-s copy B,C and D that my broker sent me to claim
US Witholding Tax for DEC?
Thanks
Thanks for the response PP. You may be correct - it's certainly possible that's the underpinning logic. However, I suspect it's significantly less than 25% of the savings on dividend that are going to the current abysmal BB!? But again - why all the fanfare when it was always going to be a damp squib? After the last abortive BB attempts you would think they would have learned their lesson - but seems not? Guess we need to see what tomorrow brings eh (if anything)?
My view is that they have signed a contract to outsource the BB to Peel Hunt and have put terms in kt that are making it misfire. I think it is likely they committed a quarter or less of the money that would have been paid out as a quarterly dividend to an annual buy back program.
Looking at it simplistically they may have divided the old dividend budget into 4, one part for new divi, one part for BB, two parts for debt reduction / acquisitions.
They may repeat that at each quarter going forward in which case the rate of buy back should accelerate each quarter. We will soon see.
BB campaign = Pathetic!!!
Sorts = shorts!!
PP: I'd be interested in why you think DEC are currently pursuing such an ineffective anaemic BB campaign (again). Furthermore, why trumpet this latest in the line of BB campaigns if you don't mean to do so with any real effect? Was it just a market ploy to worry the sorts (opposite effect to date) or was it to give shareholders who were making a lot of noise on this subject something to calm them (again - opposite effect to date) - or is it that good ole Rusty has just got used to saying one thing and doing another and no longer cares about his credibility? All guesswork on my part - but if he didn't intend doing a serious BB why the big announcement? Do you have a view?
Go to the agm this Friday and make your point notrex. It's in London, you can get a seta as a holder. I'm thinking of going.
So, no daily weak-wristed anaemic 3,750 buyback today - but it's so pitifully tiny I don't think it makes any difference either way? Yet another loudly trumpeted BB campaign from DEC (I believe it's four consecutively now?) that in reality prove to be no more than a pathetic whimper.
No George. I'm a mug too, although PE indirectly gave me the money to be so.
I'm not quite in the target demographic for PE funds sadly so I will just have to carry on with the fundamentals, patience, and luck strategy.
£11.25 on the bid
Bridgewater Associates increased their short last Friday by 0.1% - now at 1.00%.
# My reluctant puppet.
'...It definitely seems like DEC is now absolutely following the gas spot price despite the vast majority of production and revenue being forward hedged. That means the current price is taking literally zero account of the actual profitability of the company.
I know I shouldn't be surprised when I find market stupidity, but really? You can see why so many CEOs abandon the market in favour of private equity...'
Pickedpeck, to follow on from your question to notrex which he refused to - or was incapable of - answer, if the market is so stupid, and private equity is so smart, does this mean you're a client of a private equity firm, rather than one of the stupid market mugs ?
My poor reluctant puppet GG - seems I really did hurt you little fella - shame eh? LoL
#Game, set & match (another hashtag!).