| Latest Forum Topics / Others |
 Post Reply
|
|
Capital Reduction-Good or Bad?
|
|
|
ten4one
Master |
17-Sep-2006 17:14
|
|
x 0
x 0 Alert Admin |
Hi prettylisa, yes there'll be less shares available to the Market on one side of the equation. On the other side, less cash in the bank or capital. So it balances in the book. The only implication maybe the Company doesn't need any cash in the near future for expansion as the Company is able to generate good cash flows in the next Financial Years or they've more than sufficient cash to fund the future expansion or they run out of ideas how to put the cash for better usuage.If it is the last case, I suggest you get out fast. Cheers! |
| Useful To Me Not Useful To Me | |
|
teeth53
Supreme |
17-Sep-2006 16:35
Yells: "don't learn through life, learn to grow with life " |
|
x 0
x 0 Alert Admin |
Less shares available??, just look at RH- zero value unless they can tompang into Capitalland IR success if not RH have nothing left after distribution in Singtel case, still plentyful of shares available and in Digiland case, gone case liao. So capital deduction or U call it reduction does'nt mean shares will rise, it is likely d other way round. It is oso mean companies is sort of writing off to reduce their whatever... they like to call whatever name they can and give back some $$$ to u. |
| Useful To Me Not Useful To Me | |
|
|
|
|
prettylisa
Member |
17-Sep-2006 15:31
|
|
x 0
x 0 Alert Admin |
Hello... I'm a novice. Am I right that if there is capital reduction, the share price of the stock will rise because there will be less shares available? Just trying to understand the impact of this. thanks! ~ lisa |
| Useful To Me Not Useful To Me | |
|
teeth53
Supreme |
16-Sep-2006 18:10
Yells: "don't learn through life, learn to grow with life " |
|
x 0
x 0 Alert Admin |
It is ur $$$ to roll over then pay back to u in a form of capital deduction pls dividend plus...anyway oni for the big boys as there r in need of alot, alot of $$$ to buy into better stocks. look like this day Singtel..... no good memmm....LSY is leaving for good. |
| Useful To Me Not Useful To Me | |
|
teeth53
Supreme |
16-Sep-2006 18:04
Yells: "don't learn through life, learn to grow with life " |
|
x 0
x 0 Alert Admin |
What has one invest in, get one $$$ make, it is ur yours $$$ that U R taking back, maybe oso with some interest if one bot at lower end of d px, if one bot at higher px, there goes ur interest. |
| Useful To Me Not Useful To Me | |
|
|
|
|
ten4one
Master |
16-Sep-2006 14:16
|
|
x 0
x 0 Alert Admin |
I totally agreed with shplayer, and I hate companies that buy-back their own shares instead of returning cash to S/holders. SingTel makes a cash distribution of $2.74 for each cancelled share to S/holders and based on last clsing px of $2.44; Investors still make a profit of 30c/sh (excl trading expenses) if they buy back from the open market the number of shares cancelled. Good coffe money don't you agree? Cheers! |
| Useful To Me Not Useful To Me | |
|
chipchip66
Master |
16-Sep-2006 09:25
|
|
x 0
x 0 Alert Admin |
ok shplayer, tks once again! |
| Useful To Me Not Useful To Me | |
|
shplayer
Elite |
16-Sep-2006 09:23
|
|
x 0
x 0 Alert Admin |
chipchip66, RH earlier announced that, after completion of sale of Raffles City, the Co. will be a shell with lots of cash. They will distribute the cash to shareholders via cap reduction and close the company.... i.e. all shares will be cancelled....=> no more company...no more shareholders. Cash distribution estimated at 72cts? There is a Topic on RH in this blog...check it out. |
| Useful To Me Not Useful To Me | |
|
|
|
|
chipchip66
Master |
15-Sep-2006 22:48
|
|
x 0
x 0 Alert Admin |
Tks alot. I am also wondering does it mean with Cap reduction of RH by 37c would mean the company cancelled half its shares in the market?? Also, with RH ( Raffles Holdings ) giving good share options to their staff which I see many exercising at 32c a share, does it mean the company's eps will reduce and will it hurt the NTA price? Also, how can we tell if company use treasury to give staff share options or the company issue new shares for staff to exercise? |
| Useful To Me Not Useful To Me | |
|
shplayer
Elite |
15-Sep-2006 21:26
|
|
x 0
x 0 Alert Admin |
Not really left to right pocket. In Sh BB company use its cash reserves to buy it own shares from the open mkt. The money goes to the shareholder who sold the shares. After the purchase, Co will either cancel the share or place it in its treasury. In the first instance...i.e cancellation of shares....will result in less issued shares. So, say Co. has repurchased and cancelled 10% of issued shares....and earnings are flat.....Co will still be able to post a 10% improvement on eps. Buy back shares in the treasury can be used by Co.(this method is used by Singtel) to re issue as share options for their staff.....By doing this, there is no additional share issued and hence no dilution of eps....management looks good to the investor. Another possible disadvantage to minority shareholders is the majority shareholders control of the Co. will improve with share BB and subsequent cancellation as their % holding will improve.. There are probably many other ways management/major shareholders can use Sh BB to as a tool to achieve their personnal motives and objectives. Having said this, it dosen't mean that all ShBB has a sinister motive that disadvantages the small sharehlders but it does open itself to abuse by those in control. I much prefer a higher divident payout or cap reduction.....this way, all shareholders benefit equally. |
| Useful To Me Not Useful To Me | |
|
chipchip66
Master |
15-Sep-2006 20:31
|
|
x 0
x 0 Alert Admin |
Oh! I see! Does it mean for those companies with share-buybacks, the money go out from left pocket and go-in to right pocket? Sorry, I very interested to know. |
| Useful To Me Not Useful To Me | |
|
shplayer
Elite |
15-Sep-2006 20:25
|
|
x 0
x 0 Alert Admin |
Cap Red that cancels shares will leave small shareholders with odd lots which will be difficult to dispose....and when they do, they will have to sell through their broker (higher brokerage comm vs online trading) and sell at a few bids lower than mrket price. But some companies does not cancel shares...vis a vis Keppel Corp, NOL and recently SembCorp (after sale of Semb Log). In such circumstances, small shareholders are not disadvantaged. A positive benefit of Cap Red is it is a good way for companies to distribute their excess cash to shareholders TAX FREE. Personally, what I don't like are companies that practice SHARE BUYBACK to use excess cash. But then, this is another topic for discussion. |
| Useful To Me Not Useful To Me | |
|
|
|
|
chipchip66
Master |
15-Sep-2006 19:41
|
|
x 0
x 0 Alert Admin |
Is capital reduction the latest trends now? Singtel, RH, Starhub and now GAR. Does it really benefit the shareholders? People who get back their shares would have odd lots. very difficult to trade. On the plus point, can get back some pocket money. |
| Useful To Me Not Useful To Me | |