The fact that a public company is r...

The fact that a public company is repurchasing its confess previously-issued common shares is reason to think about studying the stock for possible investment.

"ACTIVE BIDS"

The accompanying Table provides a summary of the 87 Toronto Stock Exchange ("TSE') companies that have "active" share repurchase programs (as of October 31 1995) (Table omitted). Typically a repurchase program (formally referr to as a "normal course issuer bid") was launched 12 month prior to the expiry data shown in the Table.

The maximum percentage of its issued shares that the company may repurchase through the expiry date is reported in the third rounded pillar The fourth column reports the percentage of the maximum number of shares that have been repurchased since the company launched its repurchase program.

These data have been sorted first, on the significance of the potential repurchase (maximum 10%) and then on the extent to which the repurchase has already been completed

It should be noted that as of October 31 1995 another 74 companies had filed a notice of their intention to repurchase shares further had yet to make any purchases. These companies are simply identified at the bottom of the Table.

INTERPRETING THE DATA

The existence of an active repurchase program by dint of a company can be interpreted in at least several ways:

1 The board of directors wants to impede an increase in the number of shares outstanding (and dilution of earnings by means of share ("EPS")) that will spring from a significant number of shares being issued in connection with a dividend reinvestment plan or incentive plans for employee (eg Employee Share Ownership Plans and Stock Option Plans).

2 The board of directors believes that it can obtain a better rate of recur on shareowners' money (i.e. cash in the company) according to repurchasing shares than by investing in the company's typical business assets.

3 The company has more cash than it exigencys for investing in its businesses, and, instead of paying abroad the excess cash in the form of dividends, the board of directors selects to repurchase shares and give shareowners capital gains rather than dividend income.

REGULATIONS

Share repurchases by means of companies traded on the Toronto Stock Exchange ("TSE") are control to regulations that limit the number of shares a company can repurchase during a 12-month period to S% of the issued and outstanding shares, or, up to 10% of the "public float" of a class of shares.

Companies are required to file a "notice of intention" with the exchange regarding a repurchase; issue a pres release; and, inform shareowners (via the nearest regular mailing) of the "intention" to repurchase shares. Furthermore, companies cannot begin repurchasing their shares until pair days after filing the notice and issuing the pres release.

It should be noted that a company that files a notice is subject to no obligation to actually pervert with money [i]or[/i] gain any shares during the indicated 12-month period.

Copyright Canadian Shareowner Magazine Inc. Jan/Feb 1996

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