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Encana Corporation Message Board

  • quickybuck quickybuck May 8, 2006 8:19 PM Flag

    buybacks does not reduce # of shares

    Where did all of you get the idea, that buying back shares
    reduces the number of shares?
    It only reduces the number of shares outstanding.
    The bought-back shares are now owned by the company.
    Buying back shares only gives the illusion of increasing
    shareholder value. If it does, then the company made money
    on shares it now owns (more of them at higher value).
    The shareholder got screwed. Dividends is the only true player.
    A company can grow and pay a hefty dividend to its shareholders.
    See Enbridge, paid dividends for 50 years, and look at the
    Canadian banks as a prime example.
    If EnCana would take care of its shareholders, it would pay
    hefty quarterly dividends. Not paying appropriate dividends
    puts the company in a bad light.

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    • To the OP, I can only say... Wow

      • 1 Reply to nwahsrm
      • Odd to get a reply that reopens a thread after six months lag.

        Oh well.

        Share that are bought back by the company can be "retired".

        They are likely still included in the "authorized" total shares, but they are NOT included in the fully diluted share count that is used for various metrics including P/S, PE etc. Therefore the bought back shares improve listed financial performance, improve valuation, and eventually improve share price if the company continues to do as well or hopefully better going forward.

        Look at it this way. If they buy in half the shares then you own a double sized piece of the same company.

        For example if the comany has 10 million shares out and you own 100,000 then you own 1% of the company. If the company uises its profits to buy in 5 million shares, then you own 2% of the company.

    • quickybuck

      you are really showing your ignorance here!

      All ECA shares purchased through the buyback are cancelled thus reducing the number of shares available. The net effect is that CFPS/EPS et al increase in proportion to the number of shares. It's not an illusion! Your knowledge on investing and ECA are apparently very questionable.

      You still fail to understand the nature of buybacks despite discussion on the topic the last year on this Board. And you can never be convinced otherwise.


      • 1 Reply to teutracker
      • johnwagner May 8, 2006 8:41 PM Flag

        Shares bought back by a company are never cancelled.
        The company now owns these shares.
        They may at a later time sell these shares again,
        or also sell them to their employees.
        The only way to reduce the number of shares for a company
        is by a reverse split. Bought-back shares are owned by the
        company. This is just the way it is.
        You see, for a company to issue shares, they have to got
        through a regulator, financial institutions have to underwrite it.
        You think, the bought back shares are being burnt.

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