Member Info for Beo1

Which is exactly what most are saying. The buybacks wont have the effecting on the individual share price that LTI is suggesting. so if it doesn't affect the SP by the value he hopes but the shares in circulation drop by 20% by the time all the buybacks are done. If the SP hasn't moved, then what effect does that have on the Market Cap? Answers on a postcard

Thats just not correct. Little chance the volume players are buying for the dividend to then sell, to drive the ex div drops (which mostly mirror the dividend yield %). The market opens with a drop similar to the dividend % just recorded, before any real volume has started. It drops because the company has just committed to paying out a sizeable value of cash with no value to the business. Yes the movements post the open is then is some way due to what you mentioned. hence why sometimes the % drop is better or worse than the equivalent dividend % that was recorded

Mmm

thanks for that input. Not sure anyone was disputing that

Are you saying that a companies book value of assets have absolutely zero value in the SP? You don't think II will use it for there risk / reward on buying into a stock? and therefor if there is a safety net of a high NAV in comparison to the MV then that results in less risk. Less risk means more potential investors in a company, more investors means more demand means potentially a higher share price.

Its not the be all and end all, totally agree, but it 100% plays a part in an investors appetite in the stock.

Wither way LTI is muddling up 2 different events and claiming the buybacks is the catalyst for the SP increase.

Take 2 identical company's (both have underperforming elements - to the same degree, everything is exactly the same at this point)

Company A keeps the assets and continues to have depressed earnings / cash flow as a result of this

Company B sells this assets, the earnings and cash flow improve as the drag is now gone.

Think we all agree Company B would see some improvement in there SP?

Now, lets say both company's decided to sell the assets.

Company A keep the cash and reduces the net debt position resulting in a NAV of say £10b

Company B uses the cash to buyback shares, lets say £4b, resulting in a NAV of say £6b

Which company would probably have the higher market cap? A surely? But which would have the higher share price? Neither immediately! I've tried to lay this out very binary and yes other factors contribute to the market cap which cloud the impact of buybacks.

However, as I have already mentioned there is an element of supply and demand of the shares left in issues, if you are removing 20% of the shares then the remaining shares are harder to come by, so an increase is SP would come about, but not as a direct result of the buyback.

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?

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.

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

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 £

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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*Debt is nearly always cheaper than Equity

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.

Isn't the UT the days unmatched shares, so a mixture of buys and sells, just goes through as a buy or sell based on which were the most, so not really either?

Yes but the market will adjust the price accordingly.

When a takeover offer comes in, it needs to be approved just the same, but you always see the price shoot up to match it.

Agree, the latest RNS is 100% giving new information that the market previously hadnt priced in.

EG there will be a massive dilution for existing shareholders.

Also by delisting everyone market to buy and sell there shares disappears, you will own shares but the only person to easily sell them to will be JD, you think he will give you a fair price for them.

Ergo, the open will be messy, and then anyone wanting a liquid market for buying and selling shares will like want out, driving the SP even lower.

Depends, if they are in due diligence in any deals their likely be asked to sign a form stopping them from trading. I work in finance and we were buying a competitor and I had to sign a form which forbid me from trading on the stock on either business, but that was a US listed company so might just be SEC thing? But yes if they have build a forecast and that's telling them things are rosey and it's not during the closed window then they can buy or sell to their hearts content.