Abstract
The purpose of this study was to obtain an overview of the share repurchase activities of companies listed in the mining sector of the JSE, and to determine the extent to which detail information of these share repurchases are available on public data sources such as SENS (Securities Exchange News Service - the office of the JSE that distributes all relevant company information electronically). The study focused on a period of 11 years, from July 1999 until the 2010 financial year-end. The annual reports of a sample of companies were analysed to determine the number of shares, as well as the monetary value of the shares that were repurchased. The SENS announcements were then scrutinised to determine the number of share repurchases recorded in the annual reports that were announced to shareholders. From a total of 55 share repurchase transactions, only 23 transactions were announced on SENS. The repurchase transactions were then further analysed in terms of the method used (general or specific repurchase), the repurchasing entity (company, subsidiary or share trust) and the subsequent sale of treasury shares from the subsidiary to the holding company. It was concluded that the majority of share repurchases are announced. However, if only companies with primary listings on the JSE areconsidered, 60% of share repurchases are not announced. The use of the general and specific methods are more or less equal for companies with primary listings on the JSE, but for companies with secondary listings on the JSE, 98% ofrepurchases are general. Of the specific share repurchases of companies with primary listings about 46% are not announced, but of the general share repurchases about 77% are not announced. Since share repurchases made bycompanies with secondary listings on the JSE were significant in terms of numbers and value, it changed the total statistics substantially from what it would be if only companies with primary listing on the JSE were considered. Even though about 85% of total share repurchases are announced, studies on share repurchases cannot rely on SENS announcements only, since this would exclude a significant portion of the repurchase activities of companies withprimary listings on the JSE (60%), and therefore lead to unreliable results.
Highlights
In terms of the Companies Act 61 of 1973 (RSA, 1973) South African companies were not allowed to repurchase their own shares
It is clear that general repurchases are favoured above specific repurchases, and that approximately 60% of repurchase activities were not announced via SENS
Some companies were excluded from this study for the reason that there were improper disclosures in the financial statements regarding repurchases and one company was excluded due to the incorrect treatment of share repurchases
Summary
In terms of the Companies Act 61 of 1973 (RSA, 1973) South African companies were not allowed to repurchase their own shares This changed on 1 July 1999 with the promulgation of the Companies Amendment Act 37 of 1999 (RSA, 1999), allowing companies to repurchase their own shares. The use of share repurchases in South Africa got off to a slow start after 1999, in part due to uncertainty about the tax treatment of these transactions. Once these were clarified, the use of share repurchases gained some momentum
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
