RE:RE:RE:RE:RE:RE:RE:RE:Questionvr6loco wrote: Nobody gets it here, except Blindpig. Whodathunkit Hope you made some money on your sell, Good on you if you did. Good luck trying to buy back in lower after the arrangement, it won't happen! What they did is genius, I believe. Much lower tax implications and like a reverse split lowering share count and returning cash to shareholders simultaneously. $12.58 is almost arbitrary, could have been $10 or$20 doesn't matter, every shareholder is treated EQUALLY across the board including options. It would only change share count up or down. In the end the shares will be worth accordingly, being a bigger piece of the company each. Earning more per share, the market will decide nonetheless. GLTA
I don't want to be beating a dead horse here, but I agree with you that most don't get it. This is not the same as a reverse split or a dividend payout. It is designed to be the most tax efficient for non registered accounts. Meaning, for the most part, the 3 main shareholders. A significant number of retail shareholders, I'm pretty sure, have this in their TFSA's or RRSP's so it therefore becomes purely a $$ transaction. That makes it simple. If your cost is more than $12.58, you lose. You get no tax benefit from this.
Regarding the price afterwards, on a pure valuation standpoint, there will be no change in the price because of the transaction. As an example, if you have a company that has 10 mil in shares outstanding, with a market price per share of $10, the enterprise valuation would be $100 mil. Part of that valuation will be the cash it has. For this example, if the company had $50 mil in cash and decided to buy back 30% of everyones shares at $10, it would pay out $30 mil. The enterprise value of the company would drop by $30 mil as it would no longer have this asset for a total value of $70 mil. There would be 7 mil in shares left. The market would value those shares at $10. No change in share price based on the transaction.
At a later point in time, in theory, as long as the company made the same amount of money, the market would start to value the shares at a higher price. But that will take time.
If they truly wanted to see a bump in share price they would increase the dividend to a sustainable level based on the cash they have today. As I suggested in a previous post, increasing the dividend to $2 per year, which they would be able to maintain with their current cash position for several years (not taking into account additional cash they would generate), would have an almost immediate impact of increasing the share price at least $10 to $15 more. So why didn't they do that? I'm thinking they are trying to reduce the public float so it will be easier to take private and therefore the cash flow it generates will go to some VC and once again the retail investor loses out.
Cheers.