Koon Yew Yin's Blog

Author: Koon Yew Yin   |   Latest post: Fri, 23 Oct 2020, 12:06 PM


Do shareholders benefit when Top Glove buys back its own shares? Koon Yew Yin

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On 11 Sept Top Glove announced that the company spent more than Rm 100 million to buy back 13.42 million of its own shares at Rm 6.20 – Rm 8.00 each.

On 15 Sept the company announced exchanging of 5 years Guaranteed Exchangeable Bonds 2019/2024 into 2,005,073 ordinary shares at Rm 2.03 each.

For financial year ending August 2020 the company gave out 10 sen per share.

What is the purpose for the company to buy back its own shares?

The reasons can be as follows:

1 The purpose can be to support the share price.

2 The purpose can be to create an impression that the share price is undervalued.

3 The purpose is to encourage shareholders to keep their holdings and not to sell to depress the share price.

In fact, Mr Ooi Teik Bee has been sending out his weekly buy recommendation for Top Glove and many investors continue to buy in anticipation of the record profit announcement on 17 Sept. to push up the share price. As a result, the share price has taken all the good news into consideration.

All investors must realise that unless they sell their holdings, they cannot benefit when Top Glove bought back its own shares.

I took advantage of the situation and sold all my Top Glove shares.    

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