Abstract
This study undertook to derive share repurchase trends from a small sample of JSE-listed companies over the nine years, 1999 – 2008. The study also draws attention to the particular obstacles to be overcome when conducting research into the unique South African share repurchases environment.The study finds that 33 companies made 71 repurchase announcements (47 general and 24 specific) via the Securities Exchange News Service (SENS) over the period July 1999 until financial year-end in 2008. On average, 59,0% of the total number of shares (and 49,3% of the total value) repurchased under a general authority is not included in the 3% SENS announcements. General share repurchases represent 47,9% of total repurchases in volume (and 60,5% in terms of value). The total number of shares repurchased (excluding share trust purchases) by the 33 companies shows that 56,8% were repurchased by subsidiaries and 17,1% were subsequent repurchases by companies from subsidiaries. (In value, these repurchases represent 53,7% and 17,2%, respectively.)This study therefore concludes that research based on only the 3% SENS announcements of general share buy-backs results in significant understating of actual total share buy-back activities, and that the South African share repurchase environment presents unique challenges. The main obstacle for future South African research in this field however is the lack of comprehensive and accurate share repurchase data as supplied by South African financial data sources.This material is based upon work supported financially by the National Research Foundation. Any opinion, findings and conclusions or recommendations expressed in this material are those of the authors and therefore the NRF does not accept any liability in regard thereto.
Highlights
South African companies have been allowed by law (Act 37 of 1999) to repurchase their own shares since 1 July 1999
In South Africa, subsidiaries may repurchase the holding company‟s shares and share trusts may hold company shares
This study shows that total share repurchases are affected in number by the different repurchasing entities as follows: 26,1% by the company; 56,8% by the subsidiary and 17,1% in respect of the subsequent repurchases of subsidiary treasury shares by the company. (In value these repurchases represent 29,1%, 53,7% and 17,2%, respectively.) The effect of subsidiary share repurchases, as well as the re-acquisition by the holding company of shares previously held by the subsidiary, needs to be acknowledged in South African buyand-hold studies and presents unique challenges
Summary
South African companies have been allowed by law (Act 37 of 1999) to repurchase their own shares since 1 July 1999. Previous South African studies on share repurchase behaviour were conducted by Daly (2002) and Bhana (2007) and covered the periods July 1999 to September 2001 and October 2000 to March 2003 respectively. Both Daly and Bhana incorporated only announced general (or open market) share buy-backs in their studies and based their research methods on comparative studies performed on American companies. Apart from the fact that research on share buy-backs needs to be updated to include all periods, from 1999 till 2008, it is necessary to ascertain whether studies incorporating only general share buy-backs are comprehensive, and if comparative overseas studies can be applied pari passu in the South African share repurchase environment. While extensive research on share repurchases in the United States of America (USA) has been done using databases like Standard and Poor‟s Compustat financial database, researchers attempting to extend this research to the South African environment have been confronted with a lack of comprehensive share repurchase data
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