Damp Seaweed
13 Jan 2017
Line in sand We seem to be getting the first indication of where BKG management will be offering price support.~25k shares bought at a VWAP of 2878p.That seems quite a high level IMHO.I just wonder how much of the divi cash they are prepared to spend ?
fitcontroller
05 Dec 2016
Re: Maxvalue example IMHO this should be in the mid thirties or higher.
MaxValue
05 Dec 2016
Re: Maxvalue example I think the main effect of the buy back is to introduce a potential floor to the sp.As far as I can see the last time they bought shares in the open market was
ate of purchase: 27 June 2016 Number of ordinary shares purchased: 886,833 Highest price paid per share: 2348 pence Lowest price paid per share: 2180 pence Volume weighted average price paid per share: 2262.4261 penceI don't think we should now be assuming a buy back is definately on its way or that significant amounts of dividend funds will be allocated to it.Why do others think the sp is reacting like it is?GLA, DYORMV
Boyobach
05 Dec 2016
Re: Maxvalue example Eagerbeaver66: 'Well not really' - really?You've effectively reiterated what I said: Shareholders who are solely in for the divi will be out of pocket unless they sell some shares to compensate.
Eadwig
05 Dec 2016
Re: Buybacks - My final word My final, final word... and meant to be completely neutral ...Buybacks that fail most spectacularly are those that are up to 2.5% of market cap by value.The most successful are => 5% of market cap, year after year (BKG is preparing for at least 5 years of possible buybacks as I understand it).I haven't worked out the possible amount of BKG's market cap that may be involved, in fact it isn't really possible as I understand the proposal.The above is from a study I made a couple of years ago with some additional work of my own based on a list of US buybacks and their share price outcomes over a period of a minimum of 1 year of buyback programs (sic).The most successful in a company whose name escapes me for the moment, had removed and cancelled around 40% of stock from the market over a number of years. Of course, it is never possible to really be certain how much a buyback has contributed to a share price, but simple supply and demand obviously has an impact, in my opinion, at some point once the percentage of shares removed gains a certain level.
Boyobach
05 Dec 2016
Re: Maxvalue example Agreed Max.The problem with 'rough and ready', as I know to my cost, is that something can appear a lot more attractive than it is in reality. There's a big difference between a positive net divi effect over two years and a neutral effect over ten or more years. I'm with Eadwig on buybacks.I sold this morning - but that was more to do with seizing a quick profit than concern about the divi. I may repurchase if there's a retrace.
Damp Seaweed
05 Dec 2016
Re: Didn't see this coming.... BUT, what impact is £277m (assuming NO divi) going to make on the price of a £3.5bn company when the market gets involved - or a divi that is halved to 50p and £135m spent on shares in a £3500m company?========== =PE,Interesting point. The average daily volume is 1.37M shares which @£26.50 is worth about £36.3M. Or ~1% of the Mrkt cap.My intuitive conclusion is that the market has far more clout than this share buyback scheme. And therefore it seems pretty irrelevant.......IMHODS ps Disclosure : Sold out my stakes on Friday as disclosed below.
Uncle Doug
05 Dec 2016
Re: Maxvalue example Touched 2800 today so markets seem positive on the results and the buyback idea. This is a good business so I'm holding for long term.
MaxValue
05 Dec 2016
Re: Maxvalue example BoyobachMy post was just a quick rough and ready example - certainly not an accurate representation - after all we don't even know what the company has in mind in terms of strike price, size of buy back etc.I thought it was important to open the debate on how this could be an interesting development rather then just reinforcing the narrative being espoused on the bb at the time that this was something negative - the market reaction suggests it also sees this as a positive as the sp has jumped higher.GLA, DYORMV
Eagerbeaver66
05 Dec 2016
Re: Maxvalue example Well, not really:You could sell 2% of your holding now, or whatever the dividend would have equated to, and thus you receive a 'dividend' of about 110p.Meanwhile, the rest of your holding is worth 2700+, compared to the 2400+ that it would have been worth after the dividend payment.And assuming the buy-back is done efficiently, then your revised holding will own the same proportion of the Market cap as your original holding.Notwithstanding trading costs, you'll be better off allround!You won't haven't lost out on this one unless the buy-backs are done badly (which doesn't look like the case at the moment).
Eadwig
05 Dec 2016
Buybacks - My final word As I'm no longer holding, and BKG look like they may be trying a different buyback model, I don't want to condemn them out of hand. I will repeat this article that I have posted on other boards, for those with questions about buybacks, and say no more:"Harvard Business Review called them “stock price manipulation.” The Economist called them “an addiction to corporate cocaine.” Reuters called them “self-cannibalization.” Now the Financial Times, in an article by John Plender, calls them “an overwhelming conflict of interest. [maybe 9-12 months ago - Eadwig]”Yet share buybacks not only continue on a gargantuan scale—some $3.4 trillion over the last ten years. They are increasing. Last year, the FT reported that U.S. companies unleashed “a share buyback binge… Now the market stands on the cusp of seeing a record of more than $1 trillion returned to shareholders in the form of dividends and stock repurchases this year.” This is happening at a time when share prices remain close to record highs.* Stupid Institutional Decisions *If companies were buying their stock when its price was low and selling it when it was high, there might be a slender case for share buybacks. But as the FT points out, “most do not do that. They buy high and sell low.”Equally absurd is the argument that money is cheap to borrow, so why not buy shares. As the FT says, “Borrowing cheaply to buy expensively is a nonsense.”Similarly, the argument that buying shares is the best use of the company’s money because it can’t see any good investment opportunities doesn’t make any sense. “This amounts, as the FT writes, “to buying into a company that has run out of growth.”* A Massive Extraction Of Value *What is actually going on is a massive extraction of value from firms to their shareholders. The FT notes firms “boosting EPS by shrinking the equity.” This enables firms to meet the stock market’s expectations in terms of earnings and thus tends to boost the stock price for the benefit of shareholders, and the top execs.Tim Bush, head of governance and financial analysis at Pirc, the U.K. shareholder advisory group, argues that “the link of pay to earnings per share growth may create an incentive to undertake buybacks that destroy economic value. The result is that impressions of real earnings growth are distorted. The conflict of interest here is overwhelming. Too often managers are egged on by short-termist activist investors.”“There is a marked lack of transparency and accountability in what is now a huge item of corporate spending and a serious mis-allocation of capital,” writes the FT. “The cost of acquiring the shares does not appear in the P/L account as a distribution. There is no requirement to disclose any decline in the value of shares in the accounts.”* The Dumbest Idea In The World *Why are firms taking decisions that destroy economic value? Behind it all of course is what Jack Welch has called “the dumbest idea in the world,” namely, the notion that the purpose of a firm is to maximize shareholder value as reflected in the stock price.The root cause isn’t obvious because it is not a group of individuals or institutions who can be blamed. It’s an Idea. And the Idea, almost unnoticed, has come to dominate the way business works. The Idea is taught in business schools; is presumed appropriate in daily financial news reporting; is accepted as a go-to tool for any executive of a large public company; is the modus operandi of activist hedge funds; is endorsed by regulators and governments (who collect taxes on share purchases), institutional investors, analysts and politicians; and is seen by just about everyone as simple common sense. Unfortunately, the idea doesn’t work, even on its own narrow terms.* The Role Of Institutional Investors *“The big question,” writes the FT, “is why institutional investors do not blow the whistle on what all too often turns out to be an exercise in value destruction. It is hig
Eadwig
05 Dec 2016
Re: Didn't see this coming.... Rhigos, "Even worse is when they decide to borrow and go on acquisition trail when prices high or expand production too much."Even worse, and this has been the model in many cases in the USA where the buyback vogue started a few years ago, is borrowing money to buyback the shares. Period. The argument being that money is so cheap this is a winning strategy.
Boyobach
05 Dec 2016
Re: Maxvalue example Maxvalue:The main problem with your buyback example is that you've chosen an unrealistically low sp of £3 in relation to a divi of £2. In reality the SP is more like 15x the divi - say £30 for your example to provide a better model. The payback via divi then takes a helluva lot longer. Shareholders who are solely in for the divi will be out of pocket for many years unless they sell some shares to compensate.dyor
Eagerbeaver66
05 Dec 2016
Re: Didn't see this coming.... In principle the buy-backs are neutral, like re-investing your dividend; One exchanges a 5% dividend today for a future cash flow which increases from 5% to 5.25% (i.e a 5% increase from the re-invested dividend).However in practice, other things are not equal and buybacks are usually carried out above the long-term average price, or Management share-options can increase the number of shares in circulation, etc, etc. so end up giving shareholders less than the cash in hand equivalent.I generally prefer the flexibility of cash-in-hand, however in this case I like the way they've talked the share price up without spending any money on buy-backs. - The share price is already up more than the 100p dividend that would have been issued now.
PIE-EATER
05 Dec 2016
Re: Didn't see this coming.... Max,The other side of the equation is what has happened to the share price?Where there are no external factors you would expect the transactions to be neutral over time. However, Mr Market (and we divi seekers) want actual cash to decide what WE want to do with it. That is why I am not in favour.On your side of the argument, the overall return in absolute terms is going up (but then plain divis would go up if buybacks weren't implemented)BUT, what impact is £277m (assuming NO divi) going to make on the price of a £3.5bn company when the market gets involved - or a divi that is halved to 50p and £135m spent on shares in a £3500m company?TBH i'm scepticalPE
