@FreeBobby2002,
Good post - likely this manouvre adds strength to the shareprice, and for any subsequent takeover bid. What is does do is decrease the Market Cap although that is directly matched with reduced shares on issue.
It is important to make a distinction on what value. IP or cash? No premium will ever be had for cash, rather the market values the IP of Zantrene and then the equivalent cash is added to the shareprice - the cash value is fairly constant
Certainly should a Bidder come out of the woodwork, we will not hear 'we will offer you a premium for your Zantrene of 20% and 20% of your cash'. Of course this is all bundled together - some may not even want the cash and a capital return could be the result should a Takeover come knocking.
Lets have a look what the effect is of a buyback for RAC
Below are 5 columns... Shares (SOI), Cash, Market Value of Zantrene, MC (Cash and Zantrene), and of course the shareprice which is the MC divided by SOI
no one cares. but when RAC goes back to $4 or higher the Buy Back starts to increase our share price significantly as our IP, Zantrene will be cut into less shares. Below shows the Zantrene value (in
bold) as a Market Valuation, or subject to a Take Over at a premium
This buybacks benefits us all, and the higher the value of our IP, the difference becomes higher as well. Note that the cash on higher evaluations starts to mean nothing, but the less shares on issue are very noticable.
I think it a great move by management.
What will happen next?
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1) If the possibility exists for a BuyOut in 6 months or a year or longer, then because we have sacrificed cash for less shares we will all get a much better slice of the pie, and we can all send RAC thank you cards.
2) If in 1 year we are at $5, and there is no Partner or BuyOut and we need to CR/SPP well then we will all have a different opinion. My opinion is my shares are still worth more then that what they would have been without the buyout. The SPP or CR will most likely be oversubscribed like always.
3) If in 1 year we are at $1, and there is no Partner or Buyout and we need to CR/SPP well that this BuyBack is a large mistake.
RAC management have not been shy in buying RAC at all prices; I am sure they view this as a win for all.
(20min delay)