Share buyback: What you need to know

What is share buyback?

A share buyback or repurchase is a decision by a company to buy back its own shares from the marketplace. A company might buy back its shares because management considers them undervalued or discounted at current price.

Is share buyback good or bad?

A buyback will create a level of support for the stock, especially during a recessionary period or during a market correction. A buyback will increase share prices. Stocks trade in part based upon supply and demand and a reduction in the number of outstanding shares often precipitates a price increase.

Do I have to sell my shares in a buyback?

When companies announce plan to repurchase a certain number of their shares, they cannot force shareholders to sell their shares in a buyback, but they usually offer premium prices to make it attractive.

Is buyback good for investors?

In terms of finance, buybacks can boost shareholder value and share prices –thereby providing investors with a higher return on their investment.

Dangote Cement’s Tranche II share buyback commences

Dangote Cement Plc (DCP) has commenced the second tranche of its share buyback programme (Tranche II). The Africa’s largest cement maker buys back its shares from Wednesday, January 19 to Thursday, January 20 or when the entire Tranche Size has been purchased; whichever is earlier.

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The Tranche II share buyback represents only 1% of current issued shares of Dangote Cement

Dangote Cement’s current issued shares are 17,040,507,404 fully paid-up ordinary shares of 50 kobo each while the buyback tranche size is up to 170,003,074 fully paid-up ordinary shares of 50kobo each, representing 1percent of the currently issued shares, less treasury shares.

Where does it take place/stockbrokers?

The share buyback at the open market on the Nigerian Exchange Limited (NGX) and it is facilitated by two stockbrokers –Meristem Stockbrokers Limited and Vetiva Securities Limited.

Shareholders approved the buyback since May 2021

Tranche II will be executed under the approval granted by the Company’s shareholders at the Annual General Meeting of DCP, which was held on May 26, 2021, within the framework provided under Rule 398 (3)(xiv) of the Securities and Exchange Commission’s (SEC) Rules and Regulations (as applicable) and in accordance with Rule 13.18 of the Rulebook of the Nigerian Exchange Limited (NGX).

Based on the aforementioned shareholders’ approval, the number of shares to be repurchased under the Share Buy-Back Programme will not exceed 10percent of DCP’s issued capital. The Programme is being effected in tranches, with Tranche II being executed by the appointed stockbrokers on the Company’s behalf.

Through its appointed Stockbrokers, the Company will, at its discretion, purchase DCP’s shares in the open market over the duration of Tranche II, subject to prevailing market conditions and under the current daily trading rules of the NGX.

DCP would however not be under any obligation whatsoever to purchase any or all of the DCP shares put on offer over the duration of Tranche II.

The repurchased shares of Dangote Cement to be held as treasury shares

The shares being repurchased by the Company under the Share Buy-Back Programme will be held as treasury shares and may subsequently be cancelled. Execution of this Tranche II is not expected to have any material impact on the Company’s financial position.

Dangote Cement shareholders seeking to participate in Tranche II of the Share Buyback Programme are hereby advised to contact their stockbrokers or any other independent professional adviser registered as a capital market operator by the SEC for further guidance on the submission of trades on the NGX’s trading platform. DCP will provide weekly updates on the progress of Tranche II of the Programme on its website over the duration of this tranche.