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I would prefer that 4 Billion Euro wasn't invested at an average of a £1 + per share.
First 2 Billion spend should start within a few months time
LTI, your possibly on your own with that one, i think most people want it to go up as soon as possible, A bird in the hand and all that, your choice is just a last hope option if the prior fails
I;m sure you disagree but never mind
best of luck anyway
Rob
''possibly on your own with that''
really?
If I wanted to invest £10,000 into Vodafone, I would prefer to pay 70p per share
rather than £1 per share. I would be happy enough if I was possibly the only person who would want 43% more shares for my money.
The first 2bn due to be frittered away as company have no idea how else to invest the cash in future growth for a better return. To inflate the EPS figure for performance pay packages they choose a buyback instead of paying down debt.
Investors eventually pay the price for these decisions.
LTI, i get your maths behind that, but as with any share i would always prefer a share to rise now rather than a possible benefit in years to come, I think you was quite happy to benefit from Aviva rising to £5, but of course we are all different, let's hope it works well for everyone
Do you understand how WACC Works? Debt is nearly always cheaper than debt (especially as debt offers a tax shield). So you pay down debt disproportionately Equity then the WACC goes up. We already struggle to make returns above our cost of capital, and purely paying down debt only makes the returns against the cost of capital even worse (Considering the Return on Capital is before interest, so paying off debt to reduce the interest payments doesn't actually improve your return on capital, on either side of the equation, nominator or denominator.
*Debt is nearly always cheaper than Equity
Mole, plus they will have 4bn less in their pocket, how will that help a company with huge debt, Its no good getting sentimental about holding on to any share for years and years, profit now for me all day long
Mole_man99
you are talking nonsense !!
they are investing huge amounts with Microsoft and invest huge amounts every year in R&D and system maintenance ...
The debt is on low average interest rates
Buybacks remove any obligation to pay a dividend on them and supports remaining shareholder returns .....
supporting shareholder returns supports the share price , which in turn brings in those willing to invest in the shares such as pension funds, investment funds etc
M99
''The first 2bn due to be frittered away''
If you do not believe that Vodafone is not a good buy at the current levels then -
WHAT THE HELL ARE YOU DOING ON THIS BOARD?
Rob
''rather than a possible benefit in years to come''
years?
the first buyback is likely to start in less than 3 months time
Rob
''they will have 4bn less in their pocket''
Shareholder equity would decrease by a very good percentage based on the current market cap, which is the sole purpose of a buyback for cancellation.. That would mean that a shareholders ownership would go up by that percentage.
''If you do not believe that Vodafone is not a good buy at the current levels then -''
If you do not believe that Vodafone is a good buy at the current levels then -
etc.
Current market cap £19.34 Billion
4 Billion euro at current exchange rate is about £3.42 B - that is a big percentage of market cap
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.
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
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.
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
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
£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.
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
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.
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
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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.
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.