KARACHI: Synthetic Products Enterprises Ltd (SPEL) has completed its share buyback consisting of 9.9 million shares at spot prices representing 20 per cent of the free float, which is the shareholding available for the public to trade on the stock exchange.

The manufacturer of plastic auto parts and packaging material, which bought its shares between March 31 and September 20, has yet to inform the stock exchange about the average share price it paid for the buyback transaction.

According to data compiled by Arif Habib Ltd, the company’s average purchase price was Rs11.26 for 6.47m shares that it had bought until Sept 5.

The stated purpose of the buyback exercise was to hold the reacquired shareholding as treasury shares, which represent the stake that a company keeps in its treasury and doesn’t count towards the outstanding shares available in the open market.

The targeted volume of shares constitutes 5pc of the company’s total outstanding shareholding.

Many listed companies have carried out share repurchase exercises in the ready market in the recent past. The total number of shares goes down once a company conducts a buyback, leading to an increase in its earnings per share as well as its break-up value — the amount that the company would be worth if it was liquidated.

Companies that’ve completed share buybacks in recent months include Maple Leaf Cement Factory Ltd, Netsol Technologies Ltd, JDW Sugar Mills Ltd, Bank Alfalah Ltd, Lucky Cement Ltd, Engro Corporation Ltd, Kohat Cement Company Ltd, Habib Bank Ltd and Kohinoor Textile Mills Ltd.

Fresh rounds of buybacks by Lucky Cement Ltd and Habib Bank Ltd along with the first share repurchase exercise by TPL Prop­e­rties Ltd are currently underway.

SPEL has used the cash from its “distributable profits” to repurchase shares. A buyback is usually an indication that the company likes its stock enough to buy it back.

Some analysts believe the reduction in the volume of tradeable shares is bad for the stock market. Others say the exercise provides investors with a higher share price to liquidate their investments in an otherwise bear market.

The buyback trend gathered pace after an amendment to the Companies Act 2017 on Dec 4, 2021. Now the repurchase can only be made through the stock exchange based on the prevailing share price. This is different from the previously allowed method of a tender offer, which involved a company asking stockholders to sell its shares for a specific price at a predetermined time.

Published in Dawn, September 24rd, 2023