A normal-course issuer bid (NCIB) is a Canadian term for the repurchase of its own stock by a public company in order to cancel it. A company is allowed to repurchase between 5% and 10% of its shares, depending on how the transaction is done.
The issuer gradually repurchases the shares over a period of time, such as a year. This repurchase strategy allows the company to buy back only when its stock is favorably priced.
Understanding NCIB
Public companies operating in Canada must file a notice of intent to form an NCIB with the stock exchanges on which they are listed and obtain their approval before proceeding with a buyback. There is a limit on how many shares a company can repurchase in a day.
In another type of accepted issuer bid, a company will repurchase a set number of shares from its shareholders at a predetermined date and price.
If a company repurchases all of its outstanding shares in this way, it is called a private transaction.
Ways an NCIB Can Be Used
Once the NCIB approves, the company can proceed with buybacks as it sees fit during the period that has been set up. The company may or may not repurchase the full number of shares it is allowed to buy.
As is the case with any stock repurchase program, a company conducts an NCIB because its executives believe that the company’s publicly traded stock shares are undervalued. By taking back shares they are reducing the number available in the market. Their own buying activity reduces supply and increases demand, which drives the price higher.
Once the value of the shares rises to the desired level, the company may sell part of its holding to raise cash, increase liquidity and widen its base of investors.
Through a common-issuer bid, a company can take advantage of what it sees as a discount to the stock’s current price.
Restore Control
An NCIB may also be a strategy designed to prevent a hostile takeover attempt. In such cases, the company is reducing the number of its shares. That is available in the market and gaining more control over its own stock.
If the buyback is large enough, it can change the concentration and composition of stock ownership. The company may end up with a controlling interest that cannot be challenged by any third party. Once this happens, the company can maintain control by issuing. Very few new shares allow a single buyer to accumulate enough shares to influence shareholder votes or impose. It’s agenda on the company’s board of directors. So to receive.
One Digital Wallet for All Your Web3 Needs
From crypto to NFT and beyond, accessing the wealth of DeFi platforms is easier than you think. With OKX, a leading digital asset financial services provider, you can access world-class security when trading and storing assets. You can also connect an existing wallet and win up to $10,000 on completion. A deposit of over $50 via crypto purchase or top-up within 30 days of registration.