Share buybacks

The following are some of the benefits of share buybacks.

1) They will allow Singapore companies to compete on more equal terms in international financial markets with foreign companies which are able to repurchase their shares.
2) Companies with excess cash can quickly and efficiently solve the problem by returning the excess funds to the shareholders.
3) A share repurchase by a listed company may have the effect of increasing the market price of the company's shares.
4) A share repurchase may promote a competitive price environment which will help to reduce uneconomic takeover activity by allowing a potential target company to quickly adjust to its debt equity ratio.
5) A share repurchase may allow a listed company to acquire small shareholdings, such as 'odd-lots', thus reducing the company's administrative overheads and allowing the relevant shareholders to sell without incurring material transaction costs.
6) A share repurchase may be useful in allowing companies to resolve disputes with dissenting members.
7) A share repurchase gives the company flexibility in setting or fine-tuning its capital structure.
Under Singapore law, no treasury stocks are allowed. Shares purchased or acquired are deemed cancelled and the rights and privileges attached to those cancelled shares expire.

Lastly, if the company is doing a share buyback, you can be sure that the company won’t go bankrupt in the next 6 months or so. It is against the law for an insolvent company to do a share buyback!