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  • FIRST POST
    • veryintrigued
    • By veryintrigued 8th Mar 18, 7:19 AM
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    veryintrigued
    Lloyd's bank share buy back commences...
    • #1
    • 8th Mar 18, 7:19 AM
    Lloyd's bank share buy back commences... 8th Mar 18 at 7:19 AM
    Will this be the trigger for a shift in the share price?

    Is this buy back mechanism widely used?
Page 1
    • bowlhead99
    • By bowlhead99 8th Mar 18, 7:40 AM
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    bowlhead99
    • #2
    • 8th Mar 18, 7:40 AM
    • #2
    • 8th Mar 18, 7:40 AM
    It is not uncommon for a company which has more capital than it needs, to return it by buying back its own shares and cancelling them.

    This can have the effect of improving the share price because for the duration of the buy-back program there is another buyer in the market - a billion pounds available from Lloyds itself will create more demand to take shares off people's hands if people are looking to exit. All the sellers can get matched with buyers because there's a big buyer.

    Some people are cynical about buybacks but ultimately the company is more valuable, per share in issue, if it has a greater proportion of 'working' assets and a smaller proportion of idle cash. Unless it can redeploy those idle assets in something as profitable as the average of what it is doing with its other assets, it should give the money back to the company's owners to invest as they see fit.

    Rather than physically sending the owners the cash, they can simply have a market buyback program where they facilitate an orderly exit from investors who would have otherwise wanted to sell shares on the stockmarket which would have depressed the company's price. The shares are then cancelled leaving fewer shares in issue and a greater proportion of 'useful' profitable assets per share.

    Example: 1 share price, 50 billion shares in issue, 48 bn of assets used in operations to generate profits at 5% a year , 1bn of cash giving necessary liquidity to absorb any issues that come up, 1 bn of further liquid assets not doing very much and earning only 0.5% a year on rolling deposit, well below the return of the regular normal profitable assets.

    Alternatively get rid of the "1bn of further liquid assets earning 0.5% a year" and just have 49bn shares in issue supporting the 48bn of productive assets generating 5% a year return on capital and 1bn of necessary cash to absorb any liquidity issues.

    After doing the buy back and reaching the second situation the company has a greater proportion of its total assets being used to do productive stuff, generating more profit per share ; and the willingness to buy in the market can stimulate demand for the shares because nobody needs to sell them at 65p a share if Lloyds themselves will buy them back for a pound.

    [numbers are examples only]
    Last edited by bowlhead99; 08-03-2018 at 7:45 AM.
    • veryintrigued
    • By veryintrigued 4th Apr 18, 7:45 PM
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    veryintrigued
    • #3
    • 4th Apr 18, 7:45 PM
    • #3
    • 4th Apr 18, 7:45 PM
    29 million bought back in the last 36hrs.

    The markets reaction?! Not that much!
    • bowlhead99
    • By bowlhead99 4th Apr 18, 7:57 PM
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    bowlhead99
    • #4
    • 4th Apr 18, 7:57 PM
    • #4
    • 4th Apr 18, 7:57 PM
    Average volume 150 million shares traded a day. Today happened to be about 130 million.

    With that sort of volume, one might say: "Less than 30 million bought over a multi-day period? Expected market reaction - not that much!"

    As you'll have seen, markets are volatile at present. The fact that Lloyds shares haven't jumped up to a higher price does not mean there's been no beneficial price effect from Lloyds being a buyer in the market for up to hundreds of millions of pounds worth of purchases of their own shares. Consider what the price might have been if they hadn't bought all those shares. Compare what the price is and what it might have been if they hadn't done the purchases, and then you can perhaps better gauge whether the market 'reacted' or not. But likely you can't gauge it because you don't really know what the price was going to be without the purchases.
    • veryintrigued
    • By veryintrigued 4th Apr 18, 8:05 PM
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    veryintrigued
    • #5
    • 4th Apr 18, 8:05 PM
    • #5
    • 4th Apr 18, 8:05 PM
    Average volume 150 million shares traded a day. Today happened to be about 130 million.
    Originally posted by bowlhead99
    That's incredible figures! But 20 million (yesterday) is still a hefty slice of that.


    But likely you can't gauge it because you don't really know what the price was going to be without the purchases.
    Originally posted by bowlhead99
    I'll not even begin to say I do!
    Last edited by veryintrigued; 04-04-2018 at 8:08 PM.
    • Thrugelmir
    • By Thrugelmir 4th Apr 18, 8:27 PM
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    Thrugelmir
    • #6
    • 4th Apr 18, 8:27 PM
    • #6
    • 4th Apr 18, 8:27 PM
    29 million bought back in the last 36hrs.

    The markets reaction?! Not that much!
    Originally posted by veryintrigued
    Sounds like a staged repurchase then. There was a single trade of 28,437,108 shares for a consideration of 18.5 million today.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • veryintrigued
    • By veryintrigued 4th Apr 18, 9:12 PM
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    veryintrigued
    • #7
    • 4th Apr 18, 9:12 PM
    • #7
    • 4th Apr 18, 9:12 PM
    Sounds like a staged repurchase then. There was a single trade of 28,437,108 shares for a consideration of 18.5 million today.
    Originally posted by Thrugelmir
    Agree on staging - that was previously stated by them that was their aim.

    Think your figures are wrong though as....

    I got an email today stating 8,704,300 had been purchased today.
    And an email yesterday that 20,028,291 had been purchased yesterday.
    • veryintrigued
    • By veryintrigued 5th Apr 18, 5:57 PM
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    veryintrigued
    • #8
    • 5th Apr 18, 5:57 PM
    • #8
    • 5th Apr 18, 5:57 PM
    Another buyback of over 3 million shares today.

    I know it's wrong and boring but I find this fascinating!
    • bowlhead99
    • By bowlhead99 5th Apr 18, 7:35 PM
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    bowlhead99
    • #9
    • 5th Apr 18, 7:35 PM
    • #9
    • 5th Apr 18, 7:35 PM
    Another buyback of over 3 million shares today.

    I know it's wrong and boring but I find this fascinating!
    Originally posted by veryintrigued
    3 million shares is nothing in the grand scheme of things. At under 70p a share, 3m shares is worth about two million quid which is less than the CEO gets paid each year. and they are a company that's worth 40-50 BILLION with over a hundred million shares changing hands each day.

    If you watch it long enough, don't worry, it will soon stop being fascinating!
    • EdGasketTheSecond
    • By EdGasketTheSecond 5th Apr 18, 7:56 PM
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    EdGasketTheSecond
    Companies buying back their own shares are a bit like the Oszlum bird; watch out
    • veryintrigued
    • By veryintrigued 16th Apr 18, 5:57 PM
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    veryintrigued
    Another 15million bought back today!

    With lumps bought last week and previously that must be upwards of 60million.
    • bowlhead99
    • By bowlhead99 16th Apr 18, 6:14 PM
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    bowlhead99
    Another 15million bought back today!

    With lumps bought last week and previously that must be upwards of 60million.
    Originally posted by veryintrigued
    As you know, they are doing a buyback program under which the maximum they're willing to spend on buying back shares is a billion pounds between when they started it and Feb 2019.

    https://www.investegate.co.uk/lloyds-banking-group--lloy-/rns/lbg-commences-share-buyback-programme/201803080700010354H/

    15 million bought back today, that's cost them about ten million quid. Should we expect close to a hundred more similar updates as they gradually spend their billion? Even for an investor who wants to pay close attention to what their investee company is doing, it's like watching paint dry. It simply doesn't warrant the exclamation marks you're giving it

    There's only so many times or ways I can say that the odd few tens of millions of pounds worth, being bought in dribs and drabs by a company with over forty billion pounds worth of shares in issue, is pretty inconsequential when the natural level of shares in the market being turned over is 100m+ per day.

    It makes sense to do a program like this if you are in their position but if you're not a market analyst, it doesn't really make a lot of sense to watch it with eagle eyes and call out the transactions as they happen...?
    • veryintrigued
    • By veryintrigued 16th Apr 18, 6:57 PM
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    veryintrigued
    Bowlhead - within some of your very knowledgeable posts you do sometimes come across as very arrogant.

    This is one of those times.

    If you feel this thread is below you I don't see why you'd keep on returning to it?

    If you're hoping i feel chastised for my intrigue on this subject or on the amount of type of punctuation you're going to be sadly disappointed.

    Sorry for not being sorry.
    • worried jim
    • By worried jim 16th Apr 18, 7:04 PM
    • 9,134 Posts
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    worried jim
    I'm buying 205 worth on Friday. Watch the price rocket!
    "Only two things are infinite-the universe and human stupidity, and I'm not so sure about the universe"
    Albert Einstein
    • veryintrigued
    • By veryintrigued 16th Apr 18, 7:09 PM
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    veryintrigued
    I'm buying 205 worth on Friday. Watch the price rocket!
    Originally posted by worried jim
    Illegal use of the apostrophe around these parts!
    • bowlhead99
    • By bowlhead99 16th Apr 18, 8:40 PM
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    bowlhead99
    Bowlhead - within some of your very knowledgeable posts you do sometimes come across as very arrogant.

    This is one of those times.

    If you feel this thread is below you I don't see why you'd keep on returning to it?
    Originally posted by veryintrigued
    Apologies, no insults intended; I came back to it as it was a thread I'd been on before and I saw it close to the the top of the forum again so wondered if there had been some news, change of strategy, they'd already completed the program early etc- or what new insight or commentary was going on.

    But the new update less than two weeks after the last was just a confirmation that they were still buying a few million shares every so often, just like they said they might be doing for the next ten months. So my brain did a little, "hmm, why is this thread still going, is it really going to get bumped time after time so everyone on the forum can see how many they bought each day? Now OP has read that this isn't abnormal behaviour for a company and knows the high volumes that get traded every day, what's the angle?"

    I just didn't get it, so was curious about your motive for posting. I threw in the smiley to try to show I was expressing the curiosity in a light-hearted way: it's not like you owe me an explanation - it's just not 'real news'. (Other than needing to be put in announcements on a regulated news service, which does mean it's 'real news' , but not the interesting sort that usually makes people express surprise in their posts)...

    I'm buying 205 worth on Friday. Watch the price rocket!
    Originally posted by worried jim
    That's the sort of post that makes sense to find on a forum like this. Some human interest (a person is investing into the share being talked about) combined with humour (I'm on board, now watch it leap in price! / watch it drop like a stone!)

    Other than the "how does this work, what's it about" / "this is how it works, this is what it's about", the posts where people talk or joke about what they're doing about their investments are the typical sort of things I expect to see on investing threads more often than not.

    You are of course welcome to put whatever you like on a forum as it would be a pretty boring place if it was just full of the things I expected I'd find.
    • ewaste
    • By ewaste 17th Apr 18, 8:15 AM
    • 61 Posts
    • 39 Thanks
    ewaste
    Sometimes I wish there was a bit more share or fund talk on the forum as the majority of the posts tend to be along the lines of people asking where to 'invest' money when they really mean to save money. They've already made it to MSE and then to this forum which has plenty of existing information on the main website and some excellent threads about regular savers and other interest paying accounts.

    Although the threads I do enjoy reading are the ones where everyone including the original poster are trying to understand the purpose of the money they have and what risk they are or are not willing to take. The same goes for the threads where posters like Bowlhead, DunstonH, Silvertabby etc bring additional and quite specific knowledge that would take the original poster a while to find and probably still not be able to surmise what it means to them.

    On the subject of Lloyds shares, I'm also considering buying some although I probably have a higher exposure to the UK than I'd ideally like to already especially via individual shares which the general consensus rightfully has an aversion to.
    • AnotherJoe
    • By AnotherJoe 17th Apr 18, 8:25 AM
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    AnotherJoe
    I've been reassured from this thread that were i to buy a few million shares this morning i can rest content I'm not affecting the share price.
    However, just in case, I'm going to hang back a few days as i dont want any vultures jumping in here ahead of me.
    • bowlhead99
    • By bowlhead99 17th Apr 18, 10:30 AM
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    bowlhead99
    On the subject of Lloyds shares, I'm also considering buying some although I probably have a higher exposure to the UK than I'd ideally like to already especially via individual shares which the general consensus rightfully has an aversion to.
    Originally posted by ewaste
    For a potentially lower risk investment there is always their preference shares (the ones with 9.25% nominal dividends paid in May and November (LLPC) have a yield a little over 6% and would be seen as more defensive, albeit without the same capital growth potential. Though if/when interest rates rise they would be expected to fall from their highish price to improve the yield.
    • ewaste
    • By ewaste 17th Apr 18, 12:31 PM
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    ewaste
    Thanks Bowlhead, I actually had a look at Lloyds recently after Aviva looked at cancelling preference shares and seemingly caused the value to tank quite a bit across the board for other preference shares. I don't currently hold much in bonds other than those in VLS80 so was looking at them primarily as a bond proxy / de-risking. As you say though interest rates will be on the way up albeit my bet is on slowly and yield is yield especially if i was looking for income.

    My primary de-risking variable is that I'm young and still in the earning and accumulating stage of life, although I do take an interest in the wider market because of family at different stages of life.
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