Share Buyback

MrWizard

Hello,


I have a few Whitbread shares. Now they have sold the Costa part of the company they are doing a buyback. I have no idea how this works and I keep seeing the term "buyback programme" in news articles.



How do you apply for this, or do you just simply sell?




Thanks

Masomnia

You don't do anything, the company buys the shares on the market.

It's a way of returning cash to shareholders, where rather than giving you the cash as a dividend the company uses the money to buy their own shares and cancels them. So each remaining share represents a bigger slice of the company and is therefore worth more. There's a lot of debate about them, but that's the basic idea.

Tom99

Masomnia wrote: »

You don't do anything, the company buys the shares on the market.
It's a way of returning cash to shareholders, where rather than giving you the cash as a dividend the company uses the money to buy their own shares and cancels them. So each remaining share represents a bigger slice of the company and is therefore worth more. There's a lot of debate about them, but that's the basic idea.

That's the hoped for result but the company is worth less than before by the cash used to buyback the shares.

tin586

The share buyback was the first phase.
The second phase, the tender offer, is now open until 18 July.
Hopefully (depends on the outcome of the tender offer), there will also be a third phase: a special dividend.

p00hsticks

If you hold the shares in your own name rather than via a nominee account I think you should have recieved some forms in the mail by now whereby you can offer to sell your shares back to the company.

Thrugelmir

Tom99 wrote: »

That's the hoped for result but the company is worth less than before by the cash used to buyback the shares.

Not always cash. Often the money is borrowed. A way of improving the EPS figure and the management hitting their performance targets. .

Tom99

Thrugelmir wrote: »

Not always cash. Often the money is borrowed. A way of improving the EPS figure and the management hitting their performance targets. .

Its still cash even if it's borrowed so will reduce the value of the company.

Thrugelmir

Tom99 wrote: »

Its still cash even if it's borrowed so will reduce the value of the company.

Like a house. A company share is only worth what someone is prepared to pay for it.

Tom99

Thrugelmir wrote: »

Like a house. A company share is only worth what someone is prepared to pay for it.

That's true but if a company has spent it's cash buying back shares, or borrowed money to buy back shares, the company will, all things being equal, be worth less than it was worth before the buy back..

msallen

Tom99 wrote: »

That's true but if a company has spent it's cash buying back shares, or borrowed money to buy back shares, the company will, all things being equal, be worth less than it was worth before the buy back..

That's true, but if the buyback is an alternative method of getting value to the shareholders in place of a dividend, then the company will presumably spend about as much on the buyback as the dividend alternative would have cost.

Onawingandaprayer

I just noticed my entire holding in Whitbread has disappeared from my H-L online portfolio, as of midday today. Assume it's not just me (smiles nervously.)
I opted for the +4% buyback deal, btw.