The scenario of GMA ‘buying on the dip’ following an...

The scenario of GMA ‘buying on the dip’ following an unsuccessful CBA contract extension looks to be well within the reach of the GMA board of directors - - - albeit with a 10% cap on the number of GMA shares that can be purchased, prior to obtaining shareholder approval (ie an initial limit of 41.25m GMA shares exists).

For reference, on the day of the “Update on CBA LMI contract”, 17.43m GMA shares traded (with another 10m trading over the next two days).

According to GMA’s buyback announcement with the ASX, their buyback is scheduled to commence this Wednesday (8 December 2021) and is scheduled to end 31 May 2022.

GMA has reserved the right to vary, suspend or terminate the buy-back at any time, or extend the buy-back period (subject to any regulatory/other required approvals).

Per the 10% over 12 months limit, GMA states it will not buy back more than 10% of its ordinary shares without shareholder approval (next annual general meeting is not yet scheduled, but would probably be early May 2022 as most recent AGMs were 5 May 2021, 7 May 2020 and 9 May 2019).

Amongst the regulators, if you want to maintain a healthy ongoing relationship with your prudential regulator, APRA approval of a buy-back is required before any announcements.

ASIC is more involved in selective, equal access and other targeted buy back structures. Other than some filing requirements, for on-market buy backs ASIC generally defers to disallowed’s rules.

ASX Listing Rule 7.33 limits the prices paid for on-market buybacks - particularly in an appreciating share price environment. For example, 7.33 states: “A company may only buy back shares under an on-market buy-back at a price which is not more than 5% above the volume weighted average market price. . . . over the last 5 days on which sales in the shares were recorded. . . . ”. You see this covered on the 2nd page of daily buyback notices.

Rating agencies, such as S&P, were more than likely canvassed on their opinions on a buyback a priori.