Personal finance: The ins and outs of a company buyback

Personal finance The ins and outs of a company buyback

Q: It’s always nice when companies buy back stock. But if your shares are purchased from you by the corporation, which you still wish to own, you must repay brokerage commissions to repurchase. Is there a way to continue holding your shares? — Scott Bayer, Jupiter, Fla.

A: First off, shareholders are typically not required to sell their shares when corporations buy back shares. So, if you still want to be a shareholder, “why not hold on to them and let someone else sell their shares back,” says Robert Stammers, CFA charterholder and director of investor education at CFA Institute in New York City.

If, however, you do decide to sell your shares back you may or may not have to pay a commission.

“Whether or not a commission is paid depends on the way the issuer of the securities structures the buyback,” says one industry expert. “Open market purchases, through brokers, may involve a commission to be paid by the investor. However in the normal ‘tender offer’ or ‘Dutch auction’ the investor pays no commission.”

In other words, you’ll have to check with the investor relations department of the company in which you’re a shareholder. They should be able to tell you whether you’ll have to pay a commission. You should be able to find the contact information for the investor relations department on the company’s website.

Source: http://www.usatoday.com/story/money/columnist/powell/2015/02/03/commission-stock-buyback-shareholder/22769441/

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