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A proposal for companies to buy back their shares
Economy News _ Baghdad
In order to strengthen the functions of the stock market and enhance investor confidence, the Executive Director of the Iraqi Stock Exchange Taha Ahmed Abdul Salam, to start joint stock companies to buy a proportion of their shares to promote the status of those shares in daily trading.
Abdul Salam said in an interview with "Al-Sabah" newspaper and seen by "Al-Iqtisad News", that "companies in the Arab and international financial markets resort from time to time to study their potential and investment plans and measure the value of their real shares to the value of market shares in the stock market, and in light of this take Its decisions to buy back a percentage of its shares to buy back to achieve a number of goals. "
He pointed out that "the objectives of companies to buy a proportion of their shares on the stock market is to seek to enhance the earnings per share (dividend divided by the shareholders), because of the absence of growth opportunities and investment in the company and the lack of opportunities to exploit the accumulated surplus, as well as when the company finds The market value of a stock is less than its real value. "
He stressed that "during the period 2010 - 2016 US companies resorted to buy back a proportion of its shares from the stock market amounted to (3) trillion dollars," adding that "in the first quarter of 2017 the value of shares that were bought back from the financial markets (133 $ 1 billion to boost earnings per share, enhance market value and capitalize on its accumulated surplus. '
Regarding the need to approve the share buyback proposal and the reasons for this, Abdul Salam said: 'From reading the data of joint stock companies and trading indicators during the period 2015-2019 shows the importance of the proposal of companies to buy back a percentage of their shares, which can be summarized by the decline in the prices of shares traded for joint stock companies.
At a mixed rate of more than 50 percent during the period, due to the absence of growth opportunities and investment in them, and the decline in earnings per share due to the rise of capital for a significant number of companies and the inability to make profits in other companies.
"This proposal is one of the mechanisms of the international and Arab stock markets in order to enhance the value of the stock," he said.
The general assembly of the joint stock company shall approve the repurchase when discussing the final statements and accounts of the company, as well as specifying the period of retention of the shares purchased by the company and often does not exceed six months, and the shares purchased should not exceed 10% of the company's capital.
It is important to note that the shares that the company is buying back do not have the right to vote at the general assembly meeting and have no right to receive the profits until they are resold in the stock market after achieving the objective of buying them.
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