Generally it’s a good thing right when companies decide to buy back it’s own shares as it shows the company’s confidence in it’s own stock…
Edelweiss stock has doubled it’s share value. Shares valued at Rs.28 in April 14 have doubled to Rs.60 in May 14, (biggest jump on election results) They have announced buying back at the Maximum Buy-Back Price of Rs. 45 per Equity Share… so the question is… why buy back shares at this point? is this a positive move?.. seems defensive cause buying back declared by Edelweiss seems to be to safe guard it’s stock value and to ensure stock value doesn’t plummet below Rs. 45…
Am I reading it right? If anyone can enlighten me on how best to read buy-backs will be useful
Yep, when a business is buying back into its own shares is always a good sign. This could mean that the promoters are bullish about the value of their own stock. But that said, promoters are usually bad at timing the markets and the stock may not really move up just because of the buy back.
The biggest buy back in India ever was Reliance, which put up almost 4000 crores of its cash into purchasing its own stock from the market. The stock didn’t really go up in the near term, but definitely helped in arresting the fall of Reliance stock price, another reason why promoters run buy backs.
When Edelweiss announced the buy back the stock price was around 35 and the buy back price was of 45 at a 30% premium to the market price. Buy backs won’t really work when the market price of the stock is much higher, so they can’t really come and announce a buy back at 45 when stock is at 60, no one will really tender shares when they can sell higher on the market.
So, buy back was announced when stock was at 35 and not now at 60, this is a very old news.
