I am no expert on listed company law around buy backs. I believe (and only believe), they do not HAVE to be cancelled. To cancel them is the companies choice. If they cancel the shares after buy back then there are less shares on issue, NTA etc move accordingly.
If they don't cancel, then they form part of 'treasury' shares and are kept on the balance sheet as an asset (effectively an ownership in themselves).
This is my understanding, and I see it quite often on overseas shares.
But here is the kicker: There are benefits under both: a) cancel the shares: less shares on issue, NTA increases because buy back occuring under NTA value, and the company pays out less in total dividends per share (because less shares on issue)
b) keep the shares, don't cancel, the dividend on the shares go back to the company. BUT the company can sell those purchased shares in the future. Let's for a moment say HCW bought back 100,000 shares at $1. These go into the treasury. Share price goes to $1.30. HCW sells those treasury back to the market. HCW would have made $30,000 on the transaction. HCW can use the $30,000 to pay down debt.
Now obviously the sums involved are much greater than 100,000 share buy backs, but hopefully for the more enlighten out there you get the picure!!!
HCW Price at posting:
$1.06 Sentiment: Buy Disclosure: Held
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