Infomedia shares

Hi

Today there was a news item abt Infomedia shares. Currently trading at Rs. 136 or so.

If you purchase exactly 50 shares you can sell it back to the comapny at Rs. 245 on the basis of Hogh Court order. Ex date is not yet announced. If you purchase more than 50 shares then only 14% of shares will be purchased by the company. Up 50 share it is 100%. Dates will be announced shortly.

Check Today's Bussineline.

http://www.thehindubusinessline.com/...2104681500.htm

Pankaj

Sir,

I have gone through above link of thehindubusinessline. Still not understood....is making money is so much easy?....is this not a stunt to boost the price?.......it is not clear how much shares co. will buy.....also not clear about procedure to sell share to Co. (where to get 'buyback' form...will it be available to all or Co. will provide randomly)..........it seems like 'double your money in X days' scheme....

Sir, you & other Senior Members please guide....

K.S.Kachhwaha

PS- Quartely result of Infomedia is not available for quarter ended March 2006

This is what I got from Corporate announcement link for infomedia.


12-01-2006
19-06-2006
So this is for buyback. It may not have relevance to Financial results. On announcement of record dates shareholders will get a form for tendering their holdings. For last two days this is in upper circuit and CMP is already 190. So chances are that not many will be able to do that. I don't beleive in doing these things so I didn't follow through except for posting here as I was curious to know what to make of it coming from Businessline. But one thing is sure others have got wind of it and now results are there to see. Sure after record date it will fall flat for remaining shares.Hoever as shares are being cancelled underlying value may not change. If some more information is available please share it.

One more thing about this stock. It declared dividend of 80% when it was trading at 110 or so. ie 8 rs. per share a whooping 6-7% tax free cash. Not many declare such dividend in absolute terms. Lastly Tata name is associated with it. That is surprising as Tatas are rarely associated with crooked scheme.However see the shareholding pattern. Its quite interesting. So I posted it.

Any way it may be too late.

pankaj

Click - http://www.bseindia.com/qresann/news...-AE44C18319B6} for one more buyback scheme..

Nothing to be confused about it. Buyback do happen and usually happen at a price favourable than prevailing in the market. Else, who will offer the shares to the company?? Buybacks are a very good way of reducing the free float of the share and very often result in increase in promoters' holding (E.G., the proposed Arselor Buyback program--to accomodate the severstal deal). Sometimes, promoters may go for a buyback if they want to offload their shares as well and in those scenarios, one need to be alert about investing in such a company especially if a bear market is in prevalance.

Best Regards,
--Ashish

P.S.: Yes, making money in Informedia was as easy as outlined in HBL. Suspicion was genuine due to high buyback premium but we should not forget that the buy back scheme was approved by the BOD when the share prices were hovering around Rs. 200/- and not Rs. 132. As the Bombay HC's decision came at this stage, it appears to be a windfall to the shareholders now.

Hello Ashish,

I am confused due to my lack of experience (& bad experiene as well)of this market.....buyback of Arcelor is a battle of two giants (Mittal Vs Arcelor)..

I have bought some shares in 90's....some Co's has no existance now.

Is buyback not a price manipulation? ..............Let a Co. whose share price is 150...they announce buyback at 250....before announcing they buy 100K shares by family & friends.....after buyback announcement there definetely be 'upper circuit'.......now they sell 100K between 190-220......If now they buyback 1K at 250 (whether they keep it or cancel like Infomedia).....what happens.....they still make money (abt 5000K)....http://www.traderji.com/47741-post231.html

Regards,

K.S.Kachhwaha

Yes They do. In buy back promoters also sell their stake if they think price will go down. Or make money in ways pointed out by you.
The company can not keep the shares it bought from the market. It gets cancelled. So the total outstanding shares decrese and financial parameters per shares like PE,eps improve thereby increasing the price unless it is so much iondebt that inevitably become bankrupt after some time or cease to exist.

Pankaj

K.S. Bhai,

What you are referring in the paragraph is not buyback but a takeover or merger bid by Mittal Steel. To counter this, Arcelor brought Severstal as a White Knight and a part of proposed Arcelor-Severstal deal was buyback of shares by Arcelor so that the Severstal Chief can have the required percentage of ownership.

Buyback in itself is not a price manipulation tool. Buyback is a way to reduce the number of outstanding shares of a company. The reasons for buyback may be several including thwart a hostile takeover bid, increasing promoters' holding, financial gains for the promoters, etc.

However, the example you have given is not an inherent weakness of buyback. A good thing may have bad use as well and the case falls into such a category only. Whatever you have pointed out is acting on Inside Information,i.e., insider trading which is a punishable offence worldwide. So, if promoters or their associates are found guilty of insider trading, they will certainly be punished by the regulatory authorities. And remember that such kind of Insider Trading may take place in a lot of other cases also like strategic tie-ups, mergers, announcement of acquisitions and on the negative side before announcement of the bad financial health of companies.

A trader need not be worried about in such cases. Any action of insiders is properly reclected on the Chart and you just have to trade accordingly. You are paid for being on the Right side and don't forget that Insiders' side is always the right side.

Pankaj Bhai,

Will like to disagree a bit over here. After buyback, no doubt the no. of outstanding shares will decrease thereby pushing up the EPS but share prices won't move up due to this reason. Afterall, apples are compared with apples and not oranges. Any analyst worth his salt will first make the base equal before calculating EPS and change in the value of EPS. If the earnings as compared to earnings for the previous period are the same, though on paper EPS would increase, for an analyst EPS would be the same thereby prices will be the same if EPS/PE is used as a valuation tool.

Shares prices will increase immediately after buyback but that happens for another fundamental reason. After buyback as the no. of shares do decrease, the same amount of Assets are represented by lesser number of outstanding shares thereby increasing the intrinsic value of each share and as a result the share prices will increase.

Best Regards,
-Ashish

Hi Ashish

How can I disgree.
You are elaborating so beautifully.
Pankaj