The Securities and Exchange Commission has approved the move for the start of Dangote Cement Plc’s third share repurchase transaction in less than three years, the company said on Wednesday.
This confirms the company’s resolve to achieve its goal of repurchasing up to 10% of its common shares after receiving permission from the capital market regulator to begin a new share buyback program.
The Will reported that 40.2 million shares, representing 0.2% of all issued shares, were repurchased from the first phase, which was finished in December 2020, for a total of N9.8 billion.
Almost 126.7 million units, or 0.7%, were purchased back in the second tranche, which was completed in January, for a total cost of N35.1 billion.
This left the firm’s total number of remaining issued and fully paid shares at around 16.9 billion units, with more than 1.5 billion shares still needing to be repurchased to satisfy Dangote Cement’s buyback goal.
In some fashion, buying its shares allows the company to return more cash to shareholders with the hope that a decrease in the number of outstanding shares will boost the share price.
The share price of Dangote Cement has increased 16.4% to N285 from the company’s initial share repurchase on December 31, 2020, reaching a high of N300 on May 16, 2022.
According to the company’s 2022 audited annual report, cash and cash equivalents, the balance sheet item from which the money for a buyback is normally generated, were worth N283.8 billion.
The number is 16.5 percent lower than it was a year ago.
Companies buy back their shares as a type of shareholder compensation to lower their capital by canceling the repurchased stock.
Shareholders’ ownership in the company and the amount they are due from future dividends rise despite a decline in the number of shares in circulation.
Share buybacks have three main advantages.
The share price will initially tend to rise because the company’s worth remains the same but there are fewer shares available. But that relies on the market behavior.
The buyback will improve the tangible net asset value per share when the share price is less than that amount since there will be fewer shares in circulation (once the repurchased shares have been canceled).
Also, as a result of fewer shares being outstanding, earnings per share rise. Investors will find the share price more alluring as shareholders will receive a larger portion of the company’s profits.
