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VOD's first tranche of the mandatory convertible bonds (MCB) worth £1.72bn matured on 12 March, resulting in Vodafone issuing 1.43 billion shares from its Treasury. Vodafone bought back shares between 22 March and 18 May to partly offset the increase in its share capital from the maturing of the first tranche of bonds.
Vodafone said it intended to launch further buyback programmes over the next 10 months to further offset the maturing of the first tranche of bonds before the second batch matures in March 2022.
The company said it would buy back a maximum of £340m of shares and hold the securities in treasury.
Umeed, you were right. VOD issued Its bond holders shares from its treasury but the conversation was £1.72b and VOD can only back buy £340m, which means VOD's treasury will hold £1.38b less worth of its own shares!
Ok Dan, now I know that I am an outcast, not one the 4 amigos anymore...... it's fine. I am free!!!! Hahahaha
Oh and Umeed mate. I still think you didn't get what we said at all. Actually, VOD made very little profit and I am not opposed to VOD paying dividends at all. In fact it's the reason why I invested here in the first place because I am a pensioner needed dividend income to supplement my measly pension. Unfortunately VOD is unable to cover the dividend payments by a long shot. EPS is only 0.375p and dividend is 7.787p per share. Only 5% is covered by the actual earnings the other 95% comes from borrowing!!
Also, the bond are already converted into ordinary shares. They are using part of the proceeds from selling TOWERS to fund the share buy back. The shares they are buying back are actually just a small amount of the bond convertion to reduce to impact of the dilution, not really something amazing at all.
danielh, Seen_it_done_it: I think, u missed the point what I wanted to say (maybe, my mistake): Regardless, I still think, Vodafone is not short of money and that is why they are buying own shares from open market, when they could issue new Shares to convert MCBs they issued.
As for dividend, it is better option than not giving dividend. Vodafone management is confident and think that it is better to give dividend PLUS buy shares from open market too. They have option to stop buying shares, pay no dividend or do both, but their cash flow is such that they think, they can do both without much difficulty.
***
U both r right that in 2014, Vodafone consolidated its share with new 6 shares for old 11 shares (making total number of shares almost half).
What I was talking about is that, over the years Vodafone is also buying shares from open market, meanwhile Vodafone is also raising billions of dollars issuing MCB (Mandatory Convertible Bonds). Instead of issuing new shares (what Vodafone could do), Vodafone is converting those Bonds with treasury shares that vodafone buys from open market.
If Vodafone was short of money than they would not spend money buying own shares, rather, would have issued new shares to convert those Bonds (as, they could do that).
1: ***
Vodafone reasons for Share buyback programme (started 2003):
https://uk.practicallaw.thomsonreuters.com/6-102-5389?transitionType=Default&contextData=(sc.Default)
2: ***
Total number of shares Vodafone bought from March 2004 to March 2018:
https://www.vodafone.com/investors/shareholders/share-buyback-programme
3: ***
They are further buying Shares to cover £3.5 bn MCB and intend to keep buying more shares to enhance value in existing shares.
https://uk.advfn.com/stock-market/london/vodafone-VOD/share-news/Vodafone-Group-Plc-Share-Buyback-Programme/85153159
I only put down what I believe, but if anyone thinks I am wrong than also it is fine. No one HAS to agree with whatever other believes.
s.i.d.i. I thought we had already kicked you out? I was thinking of inviting Mikey instead , if he behaves himself? But seriously I totally agree with you. Personally I think if it wasn't for all the concerns that mole & you mention,the share price would be over £2, so it's a gamble. Do you feel lucky ?
.....sorry mole_man......typo...
Hey Umeed, no offense but I agree with moke_man and Dan.
First of all, VOD is not a cash machine. Profits they made from operations are not enough to keep the company going. That's why they have to borrow, borrow, borrow and borrow again!....
Number 2, they did not buy back 29 billion shares. It was because there was a 1 for 2 consolidation in 2014 thus reduced the number of shares to half.
Thirdly, more expansion means more borrowing. Simply VOD doesn't make enough money to buy other companies!!
Therefore, none of the 3 points of your post is bullish at all. Maybe many would say, debt is good. It's cheap but for how much longer? The depressed VOD SP is not without a reason......
Sorry Dan for I sounded like Mikey. You can kick me out of the 4 amigos if you want............lol
I am puzzled as to why a lot of ** appeared on my post. Around March 2014, all vodafone share holders were given approx 1 share in exchange for each 2 that they previously own'd They were also given Verizon shares, & cash.
Umeed. Thank's for your post, although I'm not sure what it has to do with my question. Bye the way, I think the main reason there are approx 1/2 as many shares now as 7 years ago, is because there was an approx 1 for 2 ************** around march 2014, when vod's share of verizon was disposed of. There may be other factors as well.
I can't hep myself. All 3 points are in reality not correct. VOD's complicated accounts hide reality for the casual investor, which is what irks me about it.
1. Div is not covered by genuine net profit. They need to borrow to pay it and have done for years and inestors lose out with declining net assets and equity.
2. The share buyback is only funded by selling assets, the towers. It is only being done to counter some of the dillution from convertible bond which could not be bought back, as they have no cash. There is another €2.5bn convertible coming in March 22.
3. Expansion is paid for by debt, not cash generation.
danielh: Vodafone is cash generating machine. They used that cash in 3 ways.
1: Dividend
2: Share buyback (making them treasury shares)
3: Expansion
In one way, share buyback is also a way of dividend to shareholders. I think during last 15 years, Vodafone has bought more than half the number of shares from the market (keeping huge chunk in treasury and cancelling them too)
Actually, Vod issued many MCB (Mandatory convertible bonds) over years. It means, once bond matures, instead of paying back cash raised through bonds, Vodafone have to pay bond holders in shares. If Vodafone is short of shares in treasury, they would need to issue new shares to pay bond holders.
Instead of issuing new shares, Vodafone pay bond holders treasury held shares (that Vodafone bought over time). Since, they cannot hold more than 10 % shares in treasury, I think, many shares got cancelled as well (probably more than half).
So, I think there is very little (if any) chance for Vodafone to get into financial trouble in near future. But market has its own way, and even though, I think Vodafone is robust company, market can give shares ridiculous valuation.
Vodafone market capitalisation about 7 yrs ago was ~ $200 bn and today it is ~$50 bn ... even though, there were ~58 bn shares (including treasury shares) 7 years ago and today there are ~29 bn shares (including treasury shares). I think, earning per share has decreased a lot too, but it could recover.
US markets had a bit of a tear end of session as Powell played down the inflation threat meaning rising rates are less likely. It may help VOD get over the ex-div speed bump.
you need to own these at 4:31pm 23rd June to collect the divy just to clear things up for anyone unsure
If vod axed it's divi would the share price eventually take off as with B.T. Big question ? I think however the answer is very complex as they are both very different. Any thoughts on this one? Historically the B.T. share price has varied far more than vod, £13 ish high down to a 60p low for B.T. VOD £4 high. £1 low. approx. I like a divi for income. not to re invest, as that defeats the whole object of a divi.
It all depends on general market movement. I think, Vod price may go down to 127 (dividend is 3.85 pence) but by evening it would recover a bit and my feeling is that, by end of week, SP would be touching 1.30 or may pass that figure.
I think, since some analysts do not like Vod paying dividend, Vod share price is subdued. Once dividend would be out of equation, Vod share price would give positive response, especially when (comparative company SP) BT is flying like eagle. Just a bit of guess.