(14) Implementing Forced Buybacks Due To Government Or Internal Pressure
It is one of the most shocking reasons why a company is implementing stock repurchase offer. Every decision of a company is not unanimous taken by the management.
Some decisions are also taken under the internal pressure of majority stake holders. Forced buybacks are the ugly truths of financial world.
Sometimes, government of a concerned country asks its public sector undertakings (PSUs) to carry out shares repurchase program. It is because buyback route is often seen as an easy tool to meet government’s financial needs such as meeting divestment targets, raising funds for different projects & many more.
Similarly, buyback decision can also be carried out on account of massive internal pressure from certain investors. In this situation, company management is not fully agreed for the stock repurchase offer but they still go for it.
This is usually carried out simply to satisfy the few influential stakeholders only. However, forced buybacks may or may not be beneficial for the underlying company depending on its available finances & prevailing competition.
(15) Signalling Company’s Plans For Voluntary Delisting
It is one of the most surprising reasons why a company is implementing stock repurchase offer. Voluntary delisting is the voluntary removal of listed securities of a company from a stock exchange.
In this process, the underlying company pays its investors & removes its securities from stock exchange. Stock buybacks play a significant role in achieving this objective.
Companies that are planning to go private or for voluntary delisting may bring stock repurchase offers from time-to-time. This strategy helps them to reduce the number of outstanding shares from the market.
As a result, shares are restricted to lesser number of investors. This limited number of shareholders will not be causing any major problem in the process of stock delisting.
Thus, it becomes easier for company to ultimately get voluntary delisted from stock exchanges.
- Reasons Behind Company’s Buyback Offer: Shutterstock