The purchase, at a public company o...

The purchase, at a public company of its avow previously-issued common shares can be interpreted as a form of insider trading. Here the "insider" is the senior management cluster (ultimately the board of directors).

One reason for this well-informed cluster to approve a share repurchase is a belief that the company's stock is being undervalued on "the market." Another is the (temporary or long-term) absence of attractive investment opportunities in the company's business(es). Still another reason is to debar an increase in the number of shares outstanding [and dilution of earnings by share (EPS)] because of a significant number of shares being issued in connection with various stock incentive plans for employees

All other factors remaining constant, a desirable efficiency of a share repurchase program is a decrease in the number of shares outstanding which will be attended at an increase in EPS. Given a stable price earnings multiple, a stock's price will increase which would provide capital gains for a company continuing shareowners.

REGULATIONS

Share repurchases by means of companies traded on the Toronto Stock Exchange (TSE) are officially referr to as "normal course issuer bids." Regulations limit the number of shares a company can repurchase during a 12 month period to 5% 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. However, a company that files a notice is in a less degree than no obligation to actually bribe any shares during the indicated 12-month period. Companies cannot begin repurchasing their shares until sum of two units days after filing the notice and issuing the pres release.

"ACTIVE BIDS"

The accompanying Table provides a summary of the 69 TSE-listed issuers that have filed a notice of intention to repurchase general shares and have filled at least 5% of the intended purchase as of January 1 1995.(Table omitted) Also included in the table are the 57 issuers who have filed a notice if it be not that who have repurchased less than 5% of the potential shares as of January 1 1995

Copyright Canadian Shareowner Magazine Inc. Mar/Apr 1995

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