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News Corporation shares increase in value following buy back promise
15 August 2011
You may have heard that shares in News Corp rose recently after the company announced healthy figures and Rupert Murdoch promised a buy back of shares. That may be surprising following the hacking scandal that surrounded the company only a few weeks ago, but it just shows how quickly things can change in business. But, what is a company buy back of shares?
Nick Ball of our Business Services team, gives a brief summary below.
A share buy back is where a company buys back its own shares. One of the principal reasons for a company wanting to purchase its own shares is to return surplus cash to shareholders, for example, after a large disposal. However, there are other key reasons why a company may wish to buy back its own shares, including, but not limited to, the following:
- to increase earnings per share;
- to increase net assets per share;
- to provide an exit route for a shareholder; and/or
- to adjust the company's level of debt to equity.
The rules governing when and how a company can buy back its shares vary depending upon the type of company. The rules can be complex and for those companies who are thinking about entering into a buy back programme, Nick advises that it is sensible to speak to a professional adviser at an early stage, so that the company can assess its options on what it is proposing to do and to ensure that it can do it legally.
Our Business Services team has experience of company buy backs and other related issues surrounding companies and how they are structured. If you run a company and would like advice on this issue or any other company related issue, please do not hesitate to contact a member of our team for an exploratory discussion.
Nick Ball, Solicitor - Business Services
