my sunday jog It is the public listed company buying back its own shares from the open market using company's fund. Shareholders' approval must be secured to use company's funds for this purpose.
Under the old rule, the shares would be cancelled. Current rule allows such shares to be placed in a Treasury Account ie. a holding account.
What are the possible reasons for such action?
- to enhance Return on Equity
- to tighten control over the company by the majority shareholders' using company's fund
- to discourage any takeover attempt by restricting supply of free floating shares
- to return excess capital back to shareholders
- to buyback and give the shares to employees as reward under its various incentive schemes
- to support the company's share price
It is usually done during periods in which the respective company thinks its share price is undervalued.
It is reported in BT yesterday that the total value of share buybacks rose from $53.47mio in July to $174.6mio in Aug to date.
UOB Bank alone accounted for $143.32mio ie. an amazing 63% of total value of share buybacks over the these 2 months. Haw Par Corp, another company related to Wee family, bought back $40mio worth of shares.
So is the Wee family signalling to us to buy too???
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