With respect I disagree with your theory / analysis as it runs contrary to the establish market theory of why you do buybacks. Your instance with Boral I am not doubting at all but I would suggest its not the rule. The problem with your theory is it assumes companies trade on some multiplier of NTA ( the Balance sheet value of assets - hence less cash , less value), but unless special circumstances apply, companies are mostly priced and trade on some multiple of earnings and the two are often far different.
Lets do some simple maths to show what established finance theory suggests should happen with buybacks using WHC today as an example ;
Assumptions ;
WHC : 900 M shares on issue and lets assume $ 4 per share earnings (EPS - close to this year's likely outcome). This would equal $ 3.60 BN in after tax earnings.
Lets assume $9.00 per share market price or $ 8.10 BN market cap, also about where we are today. That equates to PE ratio of 2.25 x earnings.
Lets assume similar to WHC's policy of 20-50 % of EPS, they pay out at the top of that range - 50 % EPS ($1.80 BN) or in this case $ 2.00 per share to shareholders.
In this case we want to decide on top of this $ 2.00 dividend do we pay out the other $ 2.00 per share of earnings as a special dividend or do a buyback ?
Buyback approach
Lets assume 200 M shares are bought back at market price of $ 9.00 = $ 1.80 BN of cash gone. Establish finance theory says that should not actually effect a PE ratio valuation but.
So now we still have $ 3.60 BN in after tax earnings and a $ 8.10 BN market cap for 700 M shares issued. That would now give an EPS of $5.14. If the market maintains its PE ratio of 2.25 x , the price per share should be $11.57. That would be a return to continuing long run shareholders of $2.57 ( $11.57 - 9) , divide by the current market price of $ 9 = 28.50 %. The remaining shareholders (700 M soi) also now share the $ 1.80 BN in dividend payout each, raising the dividend to $ 2.57 per share. So the return to the long run shareholder this year would be $ 2.57 (likely capital appreciation) + $ 2.57 dividend = $ 5.14 per share or 57.1 % on the current market price.
Dividend first approach
If you take the $ 2.00 as a straight dividend plus a $ 2.00 special dividend , you have $ 4 / 9 = 44.40 %, so the buyback wins as a strategy because it should deliver a much higher ROI (57.10%) to long run continuing shareholders.
Now yes, the real world often departs from theory, but the basics of the theory are sound when companies are trading at very low PE ratio's.If your main interest is the benefit of long run shareholders, not the ones in and out the stock trading it on volatility, established finance theory is clear , buybacks are preferred here rather than dividends.
Further Analysis - Special dividend first then buyback at lower price
Let's assume the market works like you say it does and we lose the $ 1.80 BN of cash paid out in this scenario from the market cap through a special dividend first, then doing a buyback at "an enforced lower price" from the short run beneficial effect of a lower price going ex some sort of special dividend. That would take the market cap back to $6.30 BN on 900 M shares or equal to $ 7.00 per share. Your theory suggests this is where the price should fall back too.I do agree with you , you do see this effect normally happen immediately after any dividend goes ex rights but after a short while the stock price will then start to work its way back up to the prior PE ratio or market cap valuation the market is comfortable with. This would especially be the case if you have flagged to the market you are going to be doing a significant buyback. If the price does push down to $ 7.00 per share that equates to an EPS of 1.75 x ( but 1.22 ex buyback) , so market forces seeing an asset very cheap would tend to kick in in my view very quickly to support and lift the price back up.
On WHC's average trading volumes ( circa 40- 50 M shares per week), it will take about 4-5 weeks of buying activity to buyback 200 M shares, if you are trying to do it in a non-disruptive way that doesn't push the price back up. I honestly cant see the price of WHC remaining suppressed at $ 7.00 for 5 odd weeks of time while you conduct a buyback , when its earning over $ 4.00 BN per year in earnings after tax when you are also flagging to the market you are buying back 200 M shares hence reducing SOI to 700 M, which would mean it was trading on current/forward at only circa ($ 4.9 BN mkt cap ( 700 M x $ 7 ex div price ) /4.00 BN in earnings) = 1.22 PE Ratio which is back at the completely ridiculous level it was early last year trading at before it ran up a mile very quickly.
But lets assume for the sake of the analysis, you are correct and the price drops sufficiently long after a special dividend to allow them to buyback 200 M shares in this window. They will pay out now 200 M x $ 7 = $ 1.40 BN to departing shareholders. However by doing the buyback second after a dividend you have paid out $ 400 M in extra dividends also then you otherwise would have , so your net outlay is still $ 1.80 BN on effectively departing shareholders, the same figure it would be , if you had just bought out the 200 M shares at $ 9.00 as the first step. This is why I agreed with winner1day's analysis.
Conclusions
You dont need to get into gimmickery on timing with buybacks by preceding them first with special dividends to make them work. The relevant principle is the ROI to a shareholder likely much more (with a margin of error) by doing a buyback or paying a special dividend. The analysis at the top shows it is with a reasonable degree of margin at present levels. Hence why I called all this back and forth argument on it completely stupid.
Pf
Expand
(20min delay)