Surprises from shareholders. What an investor needs to know about the repurchase and additional issue of shares

An additional issue is the issue by a company of new shares and their subsequent sale. For example, previously the company had 1000 shares, after the additional issue there will be 1100 of them. In turn, the repurchase of shares implies that the company is acquiring back already issued securities. For example, 1000 shares of a company were traded, after the buyout there will be 900. Companies usually do this when the business or shareholders need money.

Thus, over the past two years, the revenue of the retail chain “” has grown more slowly than before, profits have fallen, and debts have become more and more. To find money for development, the main shareholder (at that time) and the company's management decided to issue additional shares and sell them. Unlike a loan, you do not need to pay interest on the money received, and these funds do not need to be repaid.

As a result, Magnit sold 7.77% of new shares for 45.46 billion rubles. This is more than the annual profit: in 2022, according to the company’s estimates, it earned 35.53 billion rubles. Magnit promised to use this money to renovate old stores and build new ones.

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Novatek's business, unlike Magnit, is developing steadily: revenue and profit are growing, debts are decreasing. The company constantly buys oil and gas fields, invests money in new projects and pays dividends twice a year.

To receive even more dividends, the main shareholder and management of the company launched a share repurchase program. The fewer shares there are overall, the more payout each shareholder receives. Over the past 5 years, Novatek has bought back about 0.65% of its shares. The company spends approximately $600 million on this every year.

What is buy back (Buyback) or share repurchase

Quite often, large companies announce the repurchase of their shares from the stock exchange or directly from shareholders. This often happens when a company has free funds and there are no directions for new investments. In this case, a buyback is a good investment. The purchased securities can be redeemed, thereby changing the capital structure, or they can be redistributed among large shareholders.

Whatever the reason for this decision, a buyback is a large purchase, hence the transactions create an increase in demand. As a rule, quotes for such securities rise. If a company buys its shares at the time of a drawdown, then subsequently there is every chance of selling them at a higher price.

A very important point to note is that share buybacks usually occur at a price above the market price. Next, we will consider the methods of repurchasing securities and the main reasons for the buy-back procedure.

How will this affect the investor?

If a company conducts an additional issue or buyout, two things will change: the number of shares and the number of shareholders. This means that you will own a smaller or larger “piece” of the company, and more or fewer people will make decisions.

Let's say the company issued an additional 100% of new shares: previously there were 1000 shares traded, but now there are 2000. If you previously owned a share of 1%, now it has decreased to 0.5%. This means that you own less of the company's profits and assets.

All existing shareholders have the right of preemption to repurchase additional shares. When management proposes to vote for the additional issue, you will be able to purchase the required number of shares so that your share does not change. If you refuse or ignore, the company will offer the shares to any investors who are ready to buy them.

For example, you own shares of Magnit. You own a small share in all the stores; an additional share issue was carried out, so you seem to have fewer stores. Therefore, the share of profit they bring has decreased. This means you will be paid less dividends.

If the company bought back 50% of the old shares, everything would be the opposite: twice as much profit and property, and twice as much dividends.

For example, if you owned Novatek, with each stage of the share buyback you would own a little more gas fields and gas processing plants.

To assess the impact of an additional issue, calculate earnings per share (EPS) and payback period (P/E). When calculating EPS, you divide the company's total earnings by the number of shares to find out how much you owe. The P/E ratio (divide capitalization by earnings) allows you to find out how many years it will take for a stock to pay off.

As a result of the additional issue, new people may join the company, who will vote with you at meetings and influence the future of the business. With a share buyback, there may be fewer such people.

If a company conducts an additional issue, the new shareholders are not only private investors who bought a stake on the stock exchange. Large blocks of additional shares can be purchased by large companies, banks or funds. And they may have their own vision of the future of the company. If a shareholder has a large share, he will be able to prohibit paying dividends (25% + 1 share or more) or withdraw shares from trading on the stock exchange (95% or more shares).

• Lessons from Magnit: loss of market sense leads a business to failure

Ways to buy back your own shares

So, a buyback of shares is the repurchase by the issuer of its own shares in any of the following ways.

Buyback of shares on the open market (open-market purchase)

This method is the most common. The procedure goes like this:

1. On its official website, the issuer announces its decision to repurchase its shares. However, the duration of the procedure can be quite long – from several months to several years.
2. Next, the issuer, who in this case is an investor, submits an application to the exchange indicating the price and quantity of securities to be purchased. The timing of the application, as well as its contents, is unknown to other investors in advance.
3. The purchase of shares is carried out on all trading platforms where the issuer is represented.

If an ordinary investor bought shares during the buy-back period, as a rule, in the future he will be able to sell these securities at a higher price, because there is an increase in demand.

Tender repurchase of shares at a fixed price (self-tender order)

With this method, the repurchase occurs at a fixed price above the market price and in a shorter period of time - up to several weeks.

To participate in the tender, any shareholder must submit an application. If the number of securities in applications exceeds the supply, the issuer has the right to buy back more shares than were stated in the decision.

The difference between the repurchase price and the market value of the shares is the premium for the shareholder. If the procedure period has expired and the required number of securities has not been purchased, the issuer is obliged to purchase the missing number of shares at the price specified in the offer. There is a risk of a sharp downward change in the market price, as a result of which the company may incur losses.

Tender buyout based on the Dutch auction type (Dutch-auction)

With this type, there is a price range from the minimum value to the maximum. This method was used in Holland when holding auctions for the sale of flowers. In this case, the price range is set by the shareholders themselves.

After the deadline for accepting applications, the minimum price is determined. At this price, all shares are purchased according to applications that do not exceed the minimum established by the auction.

After completing the procedure, the issuer must accept the securities for balance. Such shares are called treasury shares.

Share repurchase (the English version of the term Buy-back) is the purchase by the issuer of its own shares from current private owners. As a result of the buyback, an increase in the value of securities remaining on the market and an increase in EPS (earnings per share) are expected.

Buy-backs are more often carried out by Western companies and are rarely found in Russia. Next we will tell you what kind of operation this is, why it is carried out and how market participants should approach it.

How does a share buyback work?

The company's management decides to conduct a share buyback. The reasons may be different, more on that later. Now let’s look at the main legal restrictions for buy-back:

1. A company cannot have active ownership interests in itself. You are only allowed to store papers. In this case, they are called treasury. They have no voting rights and no dividends.
2. If for operational purposes it is necessary to keep the shares “working”, the repurchase is made to the subsidiary.
3. The legislation gives exactly one year for further actions with shares.

To conduct share buybacks, companies turn to current shareholders or the public market. Buying from the market is a simpler and more common option.

The procedure itself looks like this: the board of directors or meeting of shareholders decides to launch a buy-back. Public notification must take place at least 30 days before the start. Usually, a message about the launch is posted on the company's official website. It states:

1. Duration ranges from several months to several years.
2. How much money is planned to be spent on the ransom?
3. Types of shares purchased.

The process of repurchasing shares occurs as standard. The company contacts a broker and through him gains access to exchange trading. If desired, the redemption can occur through several exchanges.

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If the purchase comes from the hands of a shareholder, the transaction takes place with the participation of an appraiser. He calculates the cost at which the securities can be purchased. It must be no lower than the market average for the last 6 months.

There is an important point. Shareholders have the right to refuse the sale. A forced sale can only take place if it is requested by a shareholder holding 95% of the total shares.

Why do companies go for buy-back?

There are several reasons for repurchasing securities:

1. Retained earnings have accumulated - investments in the purchase of own shares. It seems that the money is worth distributing to shareholders in dividends. This will provoke an increase in quotes, but the success may be one-time. If such indicators cannot be achieved next year, the shares will drop significantly in price.
2. Protection from unwanted investors - sometimes management really doesn’t want to allow specific figures to make decisions. If you have time to withdraw free shares from circulation, an unwanted investor will not become a shareholder.
3. Rewarding employees - especially distinguished employees receive securities or stock options as a bonus. Excellent motivation system.
4. Increasing the value of the company - when prices fall, own repurchase becomes an additional demand. This should work to increase the exchange rate and show that the company considers its value to be unreasonably low.
5. Increasing dividends - if there is a major shareholder, he may be interested in reducing the number of shares and increasing his own dividends.
6. Increasing the share of large shareholders - the fewer small shareholders, the larger packages in the hands of large ones.

What happens after the buy-back?

We wrote above that within a year after the share repurchase, management must do something with this volume. Possible options:

1. Resell on the stock exchange.
2. Use in mergers and acquisitions.
3. Distribute to employees.
4. To repay.

Let's take a closer look at the last point. Management may reduce the authorized capital. Conventionally, the entire capital was divided into 200 shares. 120 were held by large investors, and 80 were floating on the market. The company bought all 80 shares and redeemed them. Now large shareholders own not 60%, but 100%. This is an increase in influence and the ability to make key decisions, as well as an increase in dividends.

What does buy-back mean for an investor?

Often these are changes for the better (paragraph above). Even if a company is defending itself against a takeover through a buyback, it's great that it has the financial ability to do so.

The only thing to consider is what type of funds management uses for the buyback. It’s good if the procedure is performed using money from profits. If loans are attracted, this will significantly increase the debt burden. In the future, this may lead to a decrease in profitability.

Examples of buy-back of Russian companies in 2020-2021

In 2022 alone, members of the largest American rating, the S&P 500, spent $730 billion on repurchasing securities. Russian companies do not stand aside. We have fewer cases, but there is something to look at. The following companies are currently undergoing buyback procedures:

1. Norilsk Nickel: target - 3.4% of capital, amount - ₽149.54 billion, until 07/03/2021.
2. TCS Group Holding: target - 0.73% of capital, amount - ₽45 million, until 08/21/2021.
3. MTC: target - 2.4% of capital, amount - ₽15 billion, until 12/31/2021.
4. Polyus: target - 1.05% of capital, amount - ₽22.8 billion, until December 24, 2021.
5. VSMPO-Avisma: target - 2.3% of capital, amount - ₽ 5 billion, until 12/31/2021.

Conclusion on share repurchase

The process does not pose a threat to the company or its shareholders. Buy-back has a positive impact on stock prices, since after a buyback the number of shares in circulation decreases, which in turn leads to an increase in shareholders' share and dividend yield.

If you are a large shareholder, monitor the current distribution of shareholdings. You don’t want to lose influence in the company, then you should be wary if someone’s ownership of the company reaches 95% due to the repurchase of shares. Otherwise, it will have a positive effect on your share.

The Finrange service constantly collects analytics and news about all interesting public companies. With us, you will not miss the start of a buy-back and will always be able to obtain any fundamental data for making an intelligent investment decision. Try our service for free!

Why do companies buy back their own shares?

So, what are the main goals of the buy back program?

1. Increasing interest in securities from investors, growth in quotes, which is stimulated through multiple transactions.
2. Restructuring of the authorized capital by reducing the number of shares. Why is this being done?

Example 1. The company issued 1000 shares with a par value of 750 rubles. ($10 or 290 UAH) for each. Thus, the size of the authorized capital was 750,000 rubles. ($10,000 or 290,000 UAH), which was distributed in proportion:

• 40% – investor No. 1;
• 20% – investor No. 2;
• 40% are small shareholders (minorities).

So, in the interests of large shareholders (majority shareholders), a decision was made to reduce the number of shares and distribute them between investors No. 1 and No. 2 in order to increase earnings per share.

The issuer announces a buy back. Such a decision will have the following consequences:

• shares from small shareholders with a total par value of RUB 300,000. ($4,000 or UAH 116,000) goes to the issuer’s balance sheet;
• Next, the Treasury securities are redeemed. At the same time, the size of the authorized capital remains unchanged - 750,000 rubles. ($10,000 or UAH 290,000), and the number of shares is reduced to 600 with a par value of RUB 1,250. ($16.67 or 483 UAH);
• Thus, the investors' shares will be:

– investor No. 1 – 500,025 rubles. ($6,667 or 193,343 UAH) (66.67% of the authorized capital); – investor No. 2 – 249,975 rubles. ($3,333 or 96,657 UAH) (33.33% of the authorized capital).

1. Receiving tax benefits. In many countries, dividends are taxed at a higher rate than capital gains.
2. Another reason for buying back is to reduce takeover risk. When the price of a company's securities is at a low level, there is a chance that a large investor (competitor) will take a controlling stake.
3. In case of excess liquidity, buyback of shares is a good solution for redistributing funds until the moment when the company has a new direction for investment.
4. The main reason why buy back shares is carried out is to improve the relationship between the market price and profit per security.

What is a share repurchase and how does it happen?

Share repurchase is an operation to acquire this type of securities (hereinafter referred to as securities). It can be carried out through a broker on the stock exchange from free circulation or directly from the owners of shares through notarization of the transaction.

A buyback refers to the repurchase of its own shares by the issuing organization.

Reasons for buyback

The need for a buyback is always related to the current performance of the JSC, but it can be initiated either by the JSC itself or by other persons in accordance with the requirements of current legislation.

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Of the many reasons, the most significant are the following:

1. The need to increase the share of the main shareholders in the share capital and at the same time their influence on the management of the company. There may be several motivations, for example, protection from a hostile takeover, or the expectation of increased income in the future with good prospects for business development.
2. The desire to increase investment attractiveness if the analysis shows a clear underestimation of the Central Bank by the market, with a subsequent upward impact on the price.
3. Repurchase obligations imposed on JSC by law. Occurs when investment conditions for actual shareholders change and always for the worse (more details below).

Redemption procedure

There are two options:

• repurchase of freely floating shares from the market;
• repurchase of shares from shareholders under an offer.

Shares purchased from the market are withdrawn from circulation and can be immediately redeemed, that is, liquidated. But they can be intended for subsequent re-issue at the appropriate moment, when their market value grows. If such a moment does not come, then in a year they must be repaid. They can also be intended to reward their employees and be issued as a bonus.

When repurchasing shares under an offer, the repurchase price is set in advance as the weighted average market price for the last 6 months of trading. Those who wish can sell their package at this price.

What happens to repurchased securities?

So, in simple words, buyback is the acquisition of your shares as property. Consequently, as mentioned above, after the repurchase, the issuer is obliged to put the shares on the balance sheet (accept for accounting at par value). If a company buys securities in its own name, then they must be sold or redeemed within a year. If the repurchase is carried out in favor of a subsidiary, you can keep the assets on the balance sheet for an unlimited time.

There are then four options:

1. redemption of securities in order to increase earnings per share and stimulate market price growth;
2. sale to investor;
3. management motivation (distribution of shares among company employees);
4. distribution among large investors (as described in the example above).

As a rule, buyback has a positive impact on market quotes: demand increases while supply remains constant, and accordingly, the price goes up.

If shares are redeemed, their number is reduced, which means the amount of profit and dividends per security increases.

How an issuer can use repurchased shares

The most common options are the redemption of securities and bonuses to managers. A few examples:

MMC Norilsk Nickel::

LSR Group of Companies:

Pole:

How to find out about stock buybacks

All information about share repurchases is contained in open sources. Most often, issuers announce their decision to conduct a buy back on their official website. This information then appears on various websites used by investors.

You can learn about the procedures already carried out from the financial statements, in the “Cash Flow” section. If the value on the line “Issue of shares” is negative, this means that the company carried out a buyback in the past year

.

How to analyze the market when buying back shares

To reduce non-trading risks, such as various types of price manipulation, you should remain vigilant and, before making working decisions, at least analyze the market situation, study the available reports of the company conducting the buyback for the last two to three years:

1. If it is clear that the company is burdened with debts, revenue and profit indicators are low, you should not get involved in purchasing these securities.
2. If reporting and information about the assets, founders, structure and composition of the company are not available, you should at least be guided by generally accepted patterns and the fundamental indicators already mentioned.

It is profitable to buy back a company's shares when their price is near the lows of cyclical exchange rate fluctuations and if the P/E ratio - the price-to-earnings ratio - is close to the average values ​​of the same indicator for other companies in the same sector of the economy. Otherwise - the price is at its maximum, P/E exceeds the industry average - there is a high probability of impending manipulation.

Reasons for the procedure

In European countries and the USA, buyback is often carried out in order to save on taxes, because... Buybacks are more profitable than paying dividends. Therefore, the procedure is strictly regulated by law. There are the following restrictions on the volume of repurchase of own securities:

• in the USA - no more than 25%;
• in Europe – no more than 10%.

In Russia, the basis for a buyback program may be the following factors:

• reduction of the authorized capital of a joint-stock company. This procedure must be specified in the charter. The Civil Code of the Russian Federation (clause 4 of Article 99 as amended by Law No. 99-FZ dated 05.05.2014) regulates the relationship between the size of the net assets of a joint-stock company and the size of its authorized capital. If for two years in a row the value of net assets is less than the amount of the authorized capital, the company is obliged to equalize this ratio: either increase the NAV or reduce the authorized capital. This can be done in two ways: by reducing the par value of shares or reducing their number;
• reorganization of the company in the form of merger, acquisition, accession, etc.;
• requirement of a majority shareholder (holder of more than 95% of shares);
• decision of the board of directors (percentage of votes up to 10%);
• decision of the general meeting of shareholders (percentage of votes up to 25%).

A buy back can be carried out on the open market or through options, where each shareholder is sent an offer indicating the timing of the procedure and the price of the securities. Shareholders have the right to accept or reject this offer.

Buyback in Russian legislation

Buyback is carried out in accordance with the law. The company cannot simply buy back shares as it pleases.

Russian legislation allows the repurchase of shares in the following cases:

1. By decision of the general meeting or board of directors;
2. In case of reduction of the authorized capital;
3. At the request of a shareholder in the event of a reorganization of the company, a major transaction, or an amendment to the charter;
4. At least 95% of the shares are owned by one owner, then the remaining 5% are forcibly redeemed;
5. Purchase and sale is carried out directly on the stock market;

After September 11, 2001, the United States relaxed the requirements for repurchasing its shares. In 2007, China also followed the example of the United States.

The strictest rules are in Europe, where companies can only afford to buy back up to 10% of their shares.

Buyback and dividends

For shareholders who do not intend to sell their securities, buyback is beneficial in the event of cancellation of shares after their repurchase. To understand how benefits are calculated, consider Example 2 .

The company's authorized capital consists of 500,000 shares with a par value of RUB 3,750. ($50 or 1,450 UAH) each. Thus, the size of the authorized capital is $25,000,000. Over the past year, a net profit of $15,000,000 was received, which was used to pay dividends in full.

Dividends per share were:

15,000,000/500,000= 2,250 rub. ($30 or 870 UAH).

The following year, the company's management decided to carry out a buyback of 10% of the securities. Thus, the number of shares was reduced to 450,000.

If net profit remains the same, earnings per share will be:

15,000,000/450,000=2,500 rub. ($33.33 or 967 UAH).

It should be recalled that during the period while the repurchased shares are on the balance sheet of the enterprise, dividends are not accrued on them.

In Russia, the tax rate on dividends and income tax on the sale of property is the same - 13%. Therefore, it will be more profitable for the investor if the company conducts a buyback every year. After a certain period, the securities can be sold and paid once 13%, while with annual dividend payments, only the tax-free amount can be reinvested. In our example, this is 1,958 rubles. ($26.10 or 757 UAH) ​\( (30-(30*0.13)) \)​.

Dividend aspect

In most countries, dividend payments are subject to taxes, and quite large ones, which exceed the income from the increase in the share price. As a result, large investors are not interested in profits from dividends. From 1985 to 2005, according to Moody's statistics based on a study of 3,000 buy-backs of publicly traded stocks, it has been proven that for this reason buy-back can be considered an official way to save on taxes. The agency analyzed the tax efficiency of dividend payments on US exchanges. They came to the following conclusion: by paying large dividends, issuing companies significantly reduce their own value.

Baybeks in Russia

Here are a few examples of buyback from the Russian economy.

1. Lukoil. The company announced a buyback in 2022 to increase shareholder value. As part of the program, the repurchase of shares in the amount of $3 billion is announced, which is about 16% of the total size of the issuer's securities.
2. Magnet. The grocery retailer conducted a buyback in 2022 to stimulate management. The repurchase volume amounted to about 16.5 billion rubles, which is approximately 4% of the total number of shares.
3. MTS. A large mobile operator conducted a buy back in 2022 on the open market. As a result of the program, stock quotes increased noticeably.
4. Rosneft. Another oil giant announced a $2 billion buyback in 2022. (3% shares) in order to support the company's capitalization.

Redemption procedure

There are 2 options by which a company can acquire its own assets:

1. on the open market;
2. through an option.

In the first case, the company simply begins to buy existing assets on the stock exchange at the current market price. Gradually buying the required amount. The investor can either agree to the sale or remain on the sidelines with the securities he has. Depending on the repurchase strategy, there may be a change in quotes. Aggressive buying is likely to result in greater growth than moderate trading in small chunks. But in any case, due to increased demand, current quotes will increase.

When repurchasing through an option, the issuer sends all shareholders an offer with a fixed repurchase price valid for a certain period of time. The redemption price consists of the current market price and an additional premium. If, during a given period, the market price of shares becomes higher than the value of the option, then it becomes unprofitable for shareholders to sell their assets. If prices go down, then the offer becomes quite attractive for them.

Shareholders have the right to accept or reject the purchase offer based on market conditions and their personal financial goals.

Examples of buy-backs

Now let's give a few examples from foreign practice.

1. BH Billiton. A major mining company announced its decision to conduct a buyback in 2010 in order to get rid of excess liquidity reserves. For the period from 2010 to 2022. the corporation bought back about 8.3% of the share capital.
2. IBM has been conducting buybacks since 1994. The amount of ransoms amounted to more than $10 billion.
3. Apple has been doing share buybacks since 2013. When the company announced the start of a buyback, the securities rose by 8% in one day. For the period from 2013 to 2015. The company's market capitalization increased by approximately $200 billion.
4. Microsoft Corporation began conducting buybacks in 2007. For the period from 2007 to 2013. approximately $125 billion worth of shares were repurchased. In 2014, an open-ended buy-back program for the company’s securities was announced.

Advantages and disadvantages

So, what positive results are achieved after a buy back? In this article they were discussed in sufficient detail, so let’s formulate it briefly:

1. Growth in stock market prices.
2. Increased demand for securities, increased interest from large investors.
3. Increasing share capital and increasing earnings per share.
4. Getting rid of excess liquidity.
5. Tax savings.

However, the program also has disadvantages. In some cases, buyback may not bring benefits and even result in losses for shareholders, namely:

1. In case of repurchase of securities in order to stimulate management, the buy back program may be beneficial only for a limited circle of people - the company's top managers. The fact is that the remuneration of such employees is calculated within the framework of option programs that are tied to stock quotes. If profits increase, prices go up and vice versa. Thus, buy-back here is just one of the ways to increase employee income.
2. If an issuer has excess cash and no new investment opportunities for several years, this may be a sign of stagnation and should alert a long-term investor.
3. In the case of a repurchase of shares in favor of a subsidiary, often nothing changes for shareholders - the number of securities and earnings per share remain at the same level.

The concept and goals of buyback

Buyback is a repurchase of shares on the stock exchange or as a result of an offer from current owners, which is carried out by the issuer for various purposes. A literal translation from English just confirms this to us.

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The essence of the procedure is simple - the company buys shares that it itself once issued, from shareholders directly or on the stock exchange. At the same time, a certain part of the securities is withdrawn from circulation. What matters here is why companies buy back their shares. The most common reasons:

• Find free money

The company has free cash that it can spend on the implementation of some investment projects, invest in other enterprises, and pay dividends. But if the listed goals are not relevant at a given time for the enterprise, and the money should not just sit in the accounts, then you can buy back your own shares. This has a number of positive consequences for both the issuer and the investor, which we will discuss later in the article.

• Increase the attractiveness of the company and its securities

Imagine a company announces the repurchase of its own securities. First, investors receive a signal that executives believe in their business and are not afraid to invest money in it. Secondly, the number of shares in circulation decreases, therefore, the share of profit per share and dividend yield increase. All this leads to an increase in demand and prices.

• Avoid a hostile takeover

Mergers and acquisitions are common procedures for the financial market. It's good when both companies are interested in such a deal. But it also happens the other way around, when one company buys a controlling stake in another without its consent. The goal may be to completely absorb the dissenter and deprive her of the right to influence management decisions. Such a transaction is called hostile. One way to deal with it is buyback. It allows you to increase the share of large owners of the company and avoid takeover. But such an operation requires significant financial resources.

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• Make money through speculation

It will be possible to receive additional income when the buyback leads to an increase in quotes. The company will first buy its securities at the market price, and then sell them at a higher price and earn additional money.

• Encourage employees

Employees of a company can also be its shareholders, but to do this, most of them must buy shares on the stock exchange with their own money. And buyback allows you to reward successful managers or other distinguished employees with securities purchased from the market.

What should an investor do?

Having learned about the upcoming buyback, you must first find out the reasons that prompted the issuer to carry out the buyback. If this decision was caused by the fact that the company considers its shares to be undervalued on the market, then the investor can make good money on the buyback, because buybacks typically drive prices higher.

If you are a long-term investor and do not plan to sell shares in the near future, you need to track financial statements and calculate the approximate amount of dividends. This is easy to do using our examples. The only thing is that it is impossible to predict the size of net profit. But you can use data from last year's financial statements. It is also recommended to monitor the company's development in the field of new investments.

For a short-term investor, you need to pay attention to the size of the premium. If you purchase securities before the buy back starts, you can get a good income. In this case, one should take into account the current volatility indicators for this asset on the stock market.

What consequences does buyback have for an investor?

The news about the upcoming buyback is perceived positively by investors. And here are the reasons:

1. Most often, companies redeem repurchased securities. This leads to an increase in the share of each owner, which is why buy back is sometimes called an alternative to dividends.
2. The redemption price is generally set above the market price, which allows the owner to make money when selling the assets.
3. In most cases, quotes increase after a buyback. This is explained by investors' expectations that the shares will be redeemed, the profit per share and the dividend yield will increase.
4. Voluntary buyback means that the company is ready to invest in itself, therefore, it has long-term development plans. Such confidence is also transferred to the investor, and he buys the issuer's securities for his portfolio.
5. Rewarding management by transferring repurchased shares to them contributes to their more efficient work for the benefit of the company and all shareholders.

But quotes do not always rise. They may be affected by negative market factors. You also need to remember this and regularly monitor the news.