Why share buyback is....
The point I was trying to make on my previous post was that if management was really confident in what they were doing and in the fact that the company was undervalued they will really push for that share buyback.
First let me address the daily limits:
Based on the rules from the TSX, I think there are ways to bypass some of the restrictions around the daily limits: (
https://www.canadiansecuritieslaw.com/tags/tsx/):
…
- The 12-month limit remains the same, and issuers are still entitled to repurchase the greater of 10% of the public float on the date of acceptance of the NCIB by the TSX or 5% of the class of securities issued and outstanding on the date of acceptance of the NCIB by the TSX, excluding securities held by or on behalf of the listed on the issuer on such date.
- A listed issuer may make one block purchase per calendar week that exceeds the daily repurchase restrictions, subject to the maximum annual aggregate limits. A “block” is defined as a quantity of securities that either (1) has a purchase price of $200,000 or more; (2) consists of at least 5,000 securities and has a purchase price of at least $50,000; or (3) consists of at least 20 board lots of the security and totals 150% or more of the ADTV for that security; and are not owned, directly or indirectly, by an insider of the listed issuer. Once the block purchase exception has been relied upon, the listed issuer may not make any further purchases under the NCIB for the remainder of that calendar day.
50k will buy 125k shares at .4 cents
Next let me try to address why I think the share buyback is good:
I agree that a junior mining company has better uses for the money they have at hand than buying shares back but in the case of Frontiers this might not be the case. The float for this company is extremely low and good news will send the share price flying. Once the PFS and final FS are released, the price will never be the same.(assuming they are good).
These shares that the company is baying back are held in treasury by the company and can be resold in the future. If the company is able to buyback 1.5 million shares for 600k and a year from now sell those shares at Xdollars, this will be beneficial for current shareholders since it will reduce the amount of dilution. Frontiers needs close to a billion dollar and every dollar counts.
Also, remember that the price Kores will pay for the different options they have to increase their stake in the project is based on the actual share price.
In terms of current shareholders leaving, I don’t see that happening…
From Morningstar: If you look at the current owners, the top 4 own 75% of the company:
Kensington - 24,486,000 (27.34%)
Lambeth - 15,120,000 (16.88%)
Westminster - 14,294,000 (15.96%)
Blenheim - 13,790,000 (15.40%)
If you look at SEDAR you will see that they are actually founders of the company and had these shares from day 1 (>$3). They will never sell at this price.
The next owner is UBS Global Asset Management (UK), they have triple their holding in the last 4 months.
Management owns some 3-4 million shares.
Again…
if management is really confident in what they are doing and in the fact that the company is undervalued they will really push for that share buyback. (600k invested now will translate into millions later on)
and this is my concern…