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Share repurchases are an alternative to dividends. When a company repurchases its own shares, it reduces the number of shares held by the public. The reduction of the float,[6] or publicly traded shares, means that even if profits remain the same, the earnings per share increase.

There is strong evidence that companies are able to profitably repurchase shares when the company is widely held by retail investors who are unsophisticated (e.g., small investors) and more likely to sell their shares to the company when those shares are undervalued.[3] By contrast, when the company is held primarily by insiders and institutional investors, who are more sophisticated, it is harder for companies to profitably repurchase shares.[3] Companies can also more readily repurchase shares at a profit when the stock is liquidly traded and the companies' activity is less likely to move the share price.

Share repurchases avoid the accumulation of excessive amounts of cash in the corporation. Companies with strong cash generation and limited needs for capital spending will accumulate cash on the balance sheet, which makes the company a more attractive target for takeover, since the cash can be used to pay down the debt incurred to carry out the acquisition. Anti-takeover strategies, therefore, often include maintaining a lean cash position and share repurchases bolster the stock price, making a takeover more expensive

Share repurchases are an alternative to dividends

Aside from paying out free cash flow, repurchases may also be used to signal and/or take advantage of undervaluation. If a firm's manager believes their firm's stock is currently trading below its intrinsic value they may consider repurchases

Glencore is currently busy with a share buyback scheme : -

Release Date: 11/03/2015 09:00:00      Code(s): GLN     [Email this JSE Sens Item to a Friend]   [Printer Friendly Version]

Share repurchase

GLENCORE PLC
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
ISIN: JE00B4T3BW64

Baar, Switzerland
11th March, 2015

Transaction in Own Shares

Glencore plc (“Glencore”) announces that it has purchased the following number of its ordinary
shares of US$0.01 each on the London Stock Exchange as part of the share repurchase
programme announced on 20th August 2014:
                                                 
Date of purchase:                         10 March 2015
Number of ordinary shares purchased:      2,000,000
Highest price paid per share:             293.20p
Lowest price paid per share:              287.15p
The purchased shares will be held as treasury shares.

Following the above transaction, Glencore holds a total of 195,459,158 of its ordinary shares in
treasury and has 13,082,946,308 ordinary shares in issue (excluding treasury shares).

For further information please contact:

Investor:

Just a word of caution...

Share buy backs are not all good news.  WB famously asked why should he pay more for a dollar than a dollar.

On the face of it SBB offer an alternative to Directors to reward shareholders.  However, a key question is at what price, and would the money not be better spent elsewhere.  It would be stupid to engage in SBB if the company is trading at a high PE.  Dividends have a tax rate of 15% in SA, and one woudl have to do teh math and see if the perpetual/sustainable benefit of this outways the company SBB at a PE that may not be sensible.

Cheers

Mmm is see. So that is why in some of the SBB sens announcements that I have seen they specify a max Percentage, that they may pay above the ruling share price.