RE:Wild, question on NCIB Hi BSWolf
I get that , but the question is about reducing sharecount to reduce fluctuations/penny flippers .The net amount returned to shareholders does not reduce or increase in reverse split, just number of shares bought becomes less as vlaue increases .
BayStreetWolfTO wrote: Hi Wild, regarding your question...
A split up or down doesn't change your equity % as a shareholder
100 shares worth $10 or 10 shares with $100...your % of the company hasn't actually changed
Whereas an NCIB changes your equity %
To simplify say we have a company XYZ worth $10 billion and generates $1b FCF and you, JD, red, td and I all hold 1 share...and there are 5 shares outstanding. You would say we each hold a share worth $2 billion in equity and $200m of FCF per shareholder.
Now say we all got together and took company money to buy Red's shares....we take $2 billion out of the company money pay Red...now you, me, JD and TD hold 1 share each and there are 4 shares outstanding.
Our equity value is now $2.5b each and we have now $250m of FCF each and it was increased through company funds versus you having to buy additional shares to grow your equity
For instance if WCP bought back all shares except 2..
.1 for Grant and 1 you never sold...you would own 50% of WCP and at that point you could take 50% of the FCF in the form of a dividend between you and him....but you could imagine the share price if you only had 4 WCP shares left.
That is why I say buybacks first increase my ownership of the FCF....and I will take the equity gains (tax implications are different)
Hope that helps a bit.