well that’s one (rosy) scenario. I’m certainly hoping that is...

well that’s one (rosy) scenario. I’m certainly hoping that is what Dr T was alluding to by “trust us” I.e., that some good data or other developments are coming in this half/quarter that will be sufficient for the broader market to share our view of how undervalued RAC is... but that is far from certain IMO.

Here’s another scenario... inflation continues to prove harder to tame than central banks would like and rates climb higher or stay high for a longer period of time. Consumer confidence drops further and households and businesses cut back on spending. Company earnings disappoint (or people revise forecasts downwards) and the value of risk assets take another leg down (starting with the US but having an impact in Australia as well). If the broader Aussie market moves lower, spec stocks like biotech, (although already badly beaten up over the last 6 months), would have nowhere to hide and would get smacked again. RAC would then have some choices with the buyback:
1. Abandon and let the price slide (or at least progressively drop back the sandbags)... both in my mind would make the buyback irrelevant and a failure.
2. Hold their ground and try to stem the price slide. This would mean using shareholders funds to keep the price artificially high for BG (and Merchant if they wanted to play trading games) to dump into. In the scenario described, you would also expect “regular retail” to be more motivated to sell. It wouldn’t take much/long for the 4m share limit to be exhausted. Once exhausted, you’d see a big drop in the price and the company would be in a position where it has lower cash buffers and a lower share price than we would all desire.