RE:to purchase, for cancellation, up to 5,398,643 of its commonjeanstk wrote: Not sure what this means exactly, I think if there are less shares, less dilution means more value per share? Am I right? After cancelling these shares (5,398,643), CAE will have less outstanding shares and if you own shares the value should go up.
Basically, this is correct. Generally speaking a share repurchase can result in fewer outstanding shares (especially if the company cancels the shares, as opposed to holding them in treasury).
The news release mentions that CAE intends to repurchase the shares for cancellation.
If the company cancels the shares, the idea, with fewer outstanding shares, is that the earnings per share ratio will improve, all else being equal. Improved financial ratios should make the stock a more compelling buy vs. similar companies within the sector. Companies typically buy back shares at times when the company management feels that the shareprice is undervalued.
Share repurchases do not always necessary mean that the company intends to cancel them. The company could also hold the repurchased shares in treasury. As I mentioned above, a company generally re-purchases shares its own shares when it feels the shareprice is undervalued. By purchasing the shares on the open market, and holding the shares in treasury, it provides the company with an opportunity to re-sell the shares on the open market, once the bearish sentiment about the market has subsided and the stockprice is trading at a more reasonable valuation (at least in the eyes of management).
Share re-purchases can be a tricky manoeuvre in a bearish type market. Even if management feels the share price is cheap, it could always get cheaper, and management risks re-purchasing shares at a higher price than they could have otherwise, especially if the bearish sentiment on the market becomes more entrenched.
Generally speaking, however, a share re-purchase is supposed to be a signal to the market that management feels the share-price is undervalued, to the point which it feels that the best use for extra cash on hand is to repurchase the under-priced shares because of the perceived value that they represent.