Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
I’m saying they would be worth less once they were 4 billion, 12 billion or any amount of cash lighter if it’s only being used to reduce the number of shares in issue. For some reason, you seem to act as if cash is valued at zero and it can be spent with no consequences.
Sadly, the world doesn’t work that way and you haven’t stumbled upon a fool proof method of boosting the share price with no downside.
They would be a business with 12 billion less cash than before, so unless the market values the 12 billion cash at a lower figure, they would be worth 12 billion less (or whatever the market values 12 billion in cash at) when the cash is gone.
“ Profitability will not be be diminished from the sales and yet Dan/KR
you both think that Vodafone would have a market cap of under 10 Billion Euro if all the proceeds were invested in Vodafone shares.
Words fail me”
If they invested in shares and kept them it wouldn’t , if they cancelled them it would. Either option is just moving money around in one form or another.
I’m not even sure the Vodafone Spain/Italy money is pure profit as presumably they carried a level of debt that Vodafone has retained but that doesn’t change the cash into cancelled shares neither creating or destroying value on its own.
If using cash to cancel out shares wasn’t zero sum, everyone would be doing it. It only makes sense when you believe your shares are undervalued and it’s the correction in that valuation that needs to happen. If the correction in valuation doesn’t happen, you’ve basically gained nothing by spending your cash to have less shares in issue.
“ If vod buys back 12 billion euro's of shares & cancel them, the market cap will reduce by 12 billion euro's. The 12 billion euro's comes out of the market cap
That would give the rest of Vodafone a market cap of less than 10 Billion”
If Vodafone had 12 billion cash and a market cap of 22 billion, then the market has already valued the remaining business at 10 billion. The buybacks would then just be turning cash into cancelled shares which is zero sum. It neither creates nor destroys value on its own.
“ ''But the reduction in shares means the price stays the same''
The market values Vodafone (market cap) on a daily basis, which means the share price will change.”
Yes, the market will reduce the market cap/share price to reflect the billions being spent which is mitigated by the cancelled shares. In of itself, zero sum. Simple really.
“You are very confused - you want to top up at the same time as saying that the market cap will reduce to under 18 Billion Euro . Have you come to the conclusion yet that you have been talking nonsense.“
But the reduction in shares means the price stays the same, which doesn’t suit your narrative, so you’ll ignore that part again and round and round we go.
“ I give up - you, B and KR are lost causes - not worth wasting any more of my time on”
No one is falling for your sleight of hand attempts at making shares disappear at zero cost and no amount of copying/pasting the same old rubbish where your options are masquerading as facts or you just ignore anything that doesn’t suit you is going to change that.
"It seems one or two cannot comprehend, and need the same thing repeated to them over and over and over and over and over again until maybe then it sinks in (must be age related.)
The market decides on the valuation of Vodafone on a daily basis.
NOTHING TO DO WITH BUYBACKS, which the purpose of them is solely to reduce share capital"
It's because you keep trying to play the same trick of reducing the number of shares without accounting for the cost of reducing the number of shares.
Instead, you hide behind this nonsense of "The market decides on the valuation of Vodafone on a daily basis.". The market will reduce the valuation to reflect the reduction in cash and it will be offset by the reduction in shares, so no real change. Shock horror, this doesn't turn out to be a fool proof way to drive up the share price by reducing the numbers of share in issue at zero cost.
"" and the reduction of this large discount to the assets value "
If you looked at the huge book value forthe German assets and compared it to the recent German performance, you would think the assets were over valued
Have to hope they dont have to do any write downs on book values within the forthcoming end of year results
Have to see what they do with the book asset value for Spain too, and later Italy"
This is a concern that I have. They couldn't make money in Italy and Spain so rightly jumped ship, they state they haven't been able to get a decent return in the UK for years and won't in the future without a merger and I'm not sure if the Germany results are going to be too pretty in the short term at least. They just don't seem to be able to get a decent return in Europe at the moment and I'm not sure that the net asset value reflects that yet.
"The market determines the value of Vodafone on a daily basis.
There is no direct connection between the assets that Vodafone have and the market cap. "
Yes there is. The value and performance of those assets largely determine the share price, as well as other factors beyond the companies control. This "large discount" is reflected in the current share price and the reduction of this large discount to the assets value is what you are stating is what makes the buyback excellent value.
Fingers crossed it start to close rather than continuing to widen!
"Vodafone net assets at about 63 Billion Euro
Current market cap is less then 22 Billion Euro
this makes buybacks excellent value, making investments purchasing at a large discount the assets that generate the Vodafone profits that are the main driver of market valuations."
Only if they can close that value gap but I'm glad that you now acknowledge the value of a businesses assets will have an impact on it's share price. Sadly, it seems to have been moving steadily in the opposite direction, so either the market is wrong, they aren't worth that in the first place/are depreciating in value, or the market believes that this management team can't realise their full potential. Hopefully, the picture will be clearer in May.
"Returns allocated to shareholders from profitability of the business will in the near future be distributed to Billions fewer shares."
This is true. The buybacks won't drive any increase in profitability but will mean that what profitability there is will be divided between less shares. I suppose the flip side would be that the 4 billion could be invested in a profit making venture, so you'd have an increased level of profit shared between the existing number of shares.
Just to add. In this regard, I don't disagree. If the buybacks are completed and the valuation gap between net assets at about 63 Billion Euro and current market cap at less then 22 Billion Euro closes, clearly they will have played a blinder. The elephant in the room is, will that happen!
"Vodafone net assets at about 63 Billion Euro
Current market cap is less then 22 Billion Euro""
So the market is valuing them at a significant discount. Why do you believe they are wrong?
It doesn't seem so long ago that you were arguing that asset values have nothing to do with the share price/market cap, now you seem to be suggesting that the buybacks are a good idea precisely because of the believed underlying value of the assets and that the current share price is trading at a significant discount.
"The buyback will be investing 4 Billion purchasing assets at way below the actual net asset value.
The value of the investment gets transferred to the remaining shares"
Minus the cost of the assets (4 billion) that were used to fund the purchase of the shares.
Time will tell if the remaining assets are being purchased at a significant discount or not but the hope will be that they are.
Kr
''What do you think a cancelled share is?''
''it has created no value at the point of cancellation.''
''The 4 billion is essentially leaving the business ''
Stop the nonsense once and for all - 4 Billion is being INVESTED on behalf of shareholders, the result of which is shareholders will own a greater percentage of the business with the cancelled shares no longer having a right to assets and profits.
no more from me to you on the subject.
To keep it simple. 4 billion Euros will be spent on 4 billion Euros worth of shares (and then cancelled). If you are minded to think that this will add value in some way, then that's great. Maybe they should use the full 12 billion Euros on this one way bet and really make the most of it! Clearly, they are missing a trick!
To use your favourite phrase, they obviously have a lot of learn.
"Do you not get that as the shareholder you own a bigger part of the company for every cancelled share?"
A company that has used it's own cash, from a one off sale, to acquire these shares and so ends up poorer at the end of it? A bigger slice of a smaller pie.
""ffs does it really need spelling out? dividends are monies leaving the business"
What do you think a cancelled share is? Over time, this may prove to be beneficial, or it might not but it has created no value at the point of cancellation.
At the point of cancellation, you are just converting cash into a share to be cancelled. The 4 billion is essentially leaving the business in the form of these cancelled shares.