Datatec spends R300m on share buybacks
Share buybacks are a major theme in global equity markets, particularly the US
Datatec has spent another R300m on buying back its own shares in recent months, says the information and communications technology group, which has a market capitalisation of R6.6bn.
Stock buybacks, which sometimes signal a lack of new investment opportunities for the company doing them, are used to consolidate ownership, support the share price and boost financial ratios including earnings per share.
Datatec, which raised $672m by selling certain businesses in its 2018 financial year, has said its share repurchase programme is aimed at returning surplus cash to shareholders.
The company said on Tuesday it had bought back 5% of its shares since its annual general meeting on September 20 2018, at a total cost of about R300m. The shares would be cancelled and delisted.
In the seven months prior to its annual meeting, the company bought back 2.1% of its shares at a cost of $8.1m.
Datatec, headed by Jens Montanana, also said shareholders had approved further buybacks.
Since the company’s share price was rebased in January 2018, when it paid out a special dividend related to asset sales, the stock has lost another 10.9%, closing at R28 on Tuesday.
According to reports, US companies forked out more than $1-trillion for share buybacks in 2018 – a record. That equates to about three-times SA’s GDP.
Technology companies including Facebook increased the size of their buyback programmes through the year, to the ire of some investors who believed they could put that cash to better use.
In SA’s technology segment, Adapt IT also repurchased shares in 2018, while internet giant Naspers has come under pressure from some shareholders to do the same. But the cash-flush group has said better investment opportunities are available. Naspers finance chief Basil Sgourdos told shareholders in 2018 buybacks would probably only result in a short-term gain in the share price.
Also on Tuesday, Reinet Investments said it had spent R52.6m on buybacks last week alone. Under the current programme, the company has spent R515m plus transaction costs.