Replies to post #13609 on Cardinal Resources Inc fka CDNL

[lowtrade]

Research more. You'll find CDNL has reported that's not top priority somewhere. I don't remember directly where to send you to find that. But I have see it in some official release. As I recall it's wanted, but not actually required. I May be wrong. But a share buy back means squat anyway. It does not increase company or stock value. It does help appearances though.

If your one who buys appearance of more value, it will mean more to you then me. Share buy backs are mainly good news for national exchange stocks. Because it improves fundamental things, long term investors make their entry decisions on.

[12yearplan]

Don’t think CDNL’s buyback can start unless they have eliminated all convertible debt.
I read somewhere as well a company isn’t obligated to follow through with an announcement of it’s intention to buyback company shares. Read also, like Low indicated in CDNL’s situation a buyback is more good feeling than substantive improvement in fundies. Some googles for interested:

Restrictions on Company Purchasing Own Shares
“There is only one combination of facts that makes it advisable for a company to repurchase its shares: First, the company has available funds -- cash plus sensible borrowing capacity -- beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively-calculated.” [1]

- Warren Buffet,

"paid-up capital may be diminished or lost in the course of the company’s trading: that is a fact which no legislation can prevent; but persons who deal with, and give credit to, a limited company, naturally rely upon the fact that the company is trading with a certain amount of capital already paid, as well as upon the responsibility of its members for the capital remaining at call; and they are entitled to assume that no part of the capital which has been paid into the coffers of the company has subsequently been paid out, except in the legitimate course of its business."­ [7]



A company in the U.S. may purchase its shares in any one of the follow­ing ways – (i) fixed price tender offer (ii) Dutch auction repurchase (iii) open market repurchase and (iv) private negotiation and may finance the offer either by cash or by debt. [13] The company’s Articles of Association must allow it to do so and a Board Resolution must be passed at the directors’ meeting. [14] There is however no statutory limit on the buyback program size or duration in the U.S. No matter by whichever method a company buys back its own shares in the U.S., it must not violate the anti-manipulative and anti-fraud provisions of Rule 10b­18 of the Securities and Exchange Act, 1934. [15] Shares bought back by the U.S. companies must be held in ‘treasury’ for the purpose of reissu­ing them in future. [16] Surprisingly, there is a lack of statute in the U.S. imposing penalty on the companies for failing to implement a buyback program or for non-compliance with buyback provisions. [17]

Read more at Law Teacher: http://www.lawteacher.net/free-law-essays/business-law/restrictions-on-company-purchasing-own-shares-business-law-essay.php#ixzz495spJLjm


A:
Stock buybacks refer to the repurchasing of shares of stock by the company that issued them. Essentially, a buyback occurs is when the issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors. Since companies raise equity capital through the sale of common and preferred shares, it may seem counter-intuitive that a business might choose to give that money back. However, there are numerous reasons why it may be beneficial to a business to repurchase its shares, including ownership consolidation, undervaluation and boosting financial ratios.

Each share of common stock represents a small stake in the ownership of the issuing company, including the right to vote on company policy and financial decisions. If a business has a managing owner and one million shareholders, it actually has 1,000,001 owners. Companies issue shares to raise equity capital to fund expansion, but if there are no potential growth opportunities in sight, holding on to all that unused equity funding means sharing ownership for no good reason. Shareholders demand returns on their investments in the form of dividends – called the cost of equity capital – so the business is essentially paying for the privilege of accessing funds it isn't using. Buying back some or all of the outstanding shares can be a simple way to pay off investors and reduce the overall cost of capital.

Another major reason why businesses repurchase their own shares is to take advantage of undervaluation. Stock can be undervalued for a number of reasons, often due to investors' inability to see past a business' short-term performance or sensationalist news items. If a stock is dramatically undervalued, the issuing company can repurchase some of its shares at this reduced price and then re-issue them once the market has corrected, thereby increasing its equity capital without issuing any additional shares. For example, assume a company issues 100,000 shares at $25 per share, raising $2.5 million in equity. An ill-timed news item questioning the company's leadership ethics causes panicked shareholders begin to sell, driving the price down to $15 per share. The company decides to repurchase 50,000 shares at $15 per share for a total outlay of $750,000 and wait out the frenzy. The business remains profitable and launches a new and exciting product line the following quarter, driving the price up past the issuing price to $35 per share. After regaining its popularity, the company reissues the 50,000 shares at the new market price for a total capital influx of $1.75 million. Because of the brief undervaluation of its stock, the company was able to turn $2.5 million in equity into $3.5 million without further diluting ownership by issuing additional shares.

Buying back stock can also be an easy way to make a business look more attractive to investors. By reducing the number of outstanding shares, a company's earnings per share ratio is automatically increased. In addition, short-term investors often look to make quick money by investing in a company right before a scheduled buyback. The rapid influx of investors artificially inflates the stock's valuation and boosts the company's price to earnings ratio.


Read more: Why would a company buyback its own shares? | Investopedia http://www.investopedia.com/ask/answers/042015/why-would-company-buyback-its-own-shares.asp#ixzz495uLwC93
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