Share buyback question

[xyz123]

Hi, asking on behalf of my friend.

He doesnt do much trading but owns around 1000 shares of a company. Some news on Internet suggests the company may do share buyback. . If and when it happens, how does it actually work? Does he get notified and has a choice to make or else? Also does it matter since when he has owned the shares. Is there a "ex" date like there is for dividend where in one must own shares by a specific date to qualify for buyback.

Sorry if this are very basic questions.

Regards

[greygoose]

Companies usually just buy shares in themselves and then cancel them to reduce the number of shares in circulation so the price should increase for the rest of the shares.

[fat80b]

That’s the way I’ve seen it done in the past. They either buy on the open market or from the big institutional investors to remove shares from the market.

I doubt you’ll get an offer letter through to sell a small number back to them

[Jon39]

xyz123 said:

.... but owns around 1000 shares of a company. Some news on Internet suggests the company may do share buyback. ....

You have not named the company (does not matter) but presume the buyback is the conventional basis.

British American Tobacco are doing a buyback at present. £2 billion is involved.
Every day they declare the purchases, which involve a huge number of individual transactions.

Shareholders don't need to do anything. It is a more tax efficient way of giving shareholders more value, than paying them a dividend would be.

As already mentioned, the cake (business) ends up with fewer slices than before (shares are purchased in the market then cancelled), so each slice (share) should become more valuable.

[vulture1]

xyz123 said:

Hi, asking on behalf of my friend.

He doesnt do much trading but owns around 1000 shares of a company. Some news on Internet suggests the company may do share buyback. . If and when it happens, how does it actually work? Does he get notified and has a choice to make or else? Also does it matter since when he has owned the shares. Is there a "ex" date like there is for dividend where in one must own shares by a specific date to qualify for buyback.

Sorry if this are very basic questions.

Regards

20,000 shares in existance. your friend owns 1000 shares so 5% of the company. Company plans to buy back 10,000 shares. Your friend now owns 10% of the company. If all else stays the same the value of your friends shares should double under this example.

[xyz123]

Thanks for your replies.