Financial policy : Question 7
What are the Pros and Cons of off-market share buy-back?
you do a share buy back off market when you want to buy a large quantity of shares owned by a large shareholder so as to prevent him from off loading them on the market and depressing the stock price. You might even be in a position to buy those shares with a discount compared to the current stock price, which is good for all shareholders as they get reluted at a below-the-market price
sometimes you buy them at a premium compared to the current stock price ( if allowed by local regulators)in order to get rid of a nasty shareholder who may be doing some blackmail to the management of the company : buy me out or I launch an hostile bid. the interest of minority shareholders is not clear in such a move as they are reluted at an above-the-market price. The one of the management is very real!
For more see chapter 37 of the Vernimmen.
sometimes you buy them at a premium compared to the current stock price ( if allowed by local regulators)in order to get rid of a nasty shareholder who may be doing some blackmail to the management of the company : buy me out or I launch an hostile bid. the interest of minority shareholders is not clear in such a move as they are reluted at an above-the-market price. The one of the management is very real!
For more see chapter 37 of the Vernimmen.