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Assuming ABC buybacks shares from existing shareholders, does it mean ABC became one of the shareholders of ABC, or those shares bought back being cancelled?
Why is share buyback one of the defence strategies of takeover?
Is the reason for share buyback due to no profitable projects to invest?
Thank you.Hello,
Company issues share to raise funds and commits to increase shareholder value i.e in form of dividend and capital gains. If company’s financial strategy requires them to buy back shares it would be like I repay my loan (it doesn’t mean that I will become borrower of myself)…….sorry I am trying to making it simple…!!!!
In case of hostile takeover bid (pre bid usually) company may buy back share @ higher price i.e in market price is 350c and company pays 500c so shareholders would sale shares to company rather than to prospective predator.
So company saves itself……..!
I think I made good attempt deserve 50% on this….!!!
Sir John, plz comment!!!
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The share buy back scheme is used reduce the number of shares in the market. ABC becames a shareholder when it buys back shares from the market.
Share buy back is used as a defence strategy from a takeover by reducing any controlling influence by any class of shareholders.
when there is a share buy back, the EPS increases and this good prospect for future investors.It does not indicate a lack of profitable investement per say.
@ mtbk;
1- Yes buy back share would be treated as treasury shares.
2- Such class of shareholders will definitely buy if they get higher price i thinkJun12 q2 proposal 1, after share buyback, share capital reduced, therefore the company seems not become its own shareholders. Why can it reduce the controlling influence of predator company?
Even if share price is pushed up. Value of the company = share price x no. of shares. Total value of the company may not increase. Why can this discourage predator company’s bid, pls? Is it because cash reduced, therefore becomes unattractive to the bidder?
Thank you.In China, the law allows company own its own shares, the rest are traded on the stock exchange. How about UK, pls?
With regard to the takeover, if share are bought back you are correct that it does not necessarily mean that the total value of the company will increase. However there will be fewer shareholders which might make it more likely that the shareholders remaining might reject the offer.
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