MMI shareholders should be deeply concerned by management’s confirmation that it has indeed run out of plans to grow its business and has started to implement a partial liquidation of the company. "Partial liquidation" is how one leading academic described share buy-backs, which in MMI’s case is being touted as a clever way of scoring R500m on the current discount between the group’s share price of about R21.40 and its embedded value of R27.05. Because of the discount MMI believes the buy-back "is the most efficient use of capital and will enhance value to shareholders". The company says the decision to spend R2bn buying up its own shares, instead of paying a dividend, is a way of distributing capital to shareholders. That’s a bit confusing because after the distribution they will no longer be shareholders. Many in the market, including analysts, think share buy-backs are a great idea and an essential tool in the capital management kit. Of course anything that gives a lift to tradin...
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