Due to the steep and persistent share price to NAV/share discount, share buyback has been a contentious issue at ICAP AGMs.
Does share buyback make sense for ICAP?
Based on the latest quarterly results (end-August 2021) and assuming that ICAP buys back 10m at RM2.43 (last Friday closing), spending about 5% of the NAV to perform share buyback will enhance the NAV/share by 2.3%.
While it can enhance the value for shareowners, the downsides are:
i) Lower share trading liquidity due to reduced number of shares, and this may lead to illiquidity discount; and
ii) Reduced fund size, which means lower fee (in absolute terms) for the fund manager .
What say you?