CBA just completed a major value-enhancing transaction for its shareholders.
The post CBA (ASX:CBA) share price jumps following $6 bn share buy back completion appeared first on The Motley Fool Australia. –
The Commonwealth Bank of Australia (ASX: CBA) share price is a top performer on Monday after the company announced the completion of its $6 billion off-market buy-back.
At the time of writing, the CBA share price is up 3.92% to $104.
According to CBA’s initial buy-back announcement, management described it as the “most efficient and value-enhancing strategy to distribute CBA’s surplus capital and franking credits.”
CBA share price jumps on off-market share buy-back
The transaction will enable CBA to buy 67.7 million shares from investors or 3.82% of its shares on issue.
The buyback will apply a 14% discount on shares with a market price of $103.05.
Participating investors will receive $88.52 for each share, including a $21.66 capital component and a full-franked dividend of $66.96.
According to the release, the buy-back was scaled back by 79.4% “due to strong demand”.
The scale back was planned to “minimise disadvantaging shareholders with a small number of shares”.
Applicants who would be left with 20 shares or less as a result of the scale back would receive their full allocation instead.
It is understood that the buy-back will reduce CBA’s CET1 capital ratio by ~133 basis points (based upon 30 June 2021 reported capital).
What’s next for CBA investors?
The statement said that payments for the buy-back will commence from Friday, 8 October.
“Payments will be made via direct credit and a statement will also be sent out from this date.”
What happened to CBA last Friday?
The CBA share price has recouped last Friday’s losses after it plunged 4.07% to $100.08.
The sharp decline was led by broad-based selling across the market, where the S&P/ASX 200 Index (ASX: XJO) tumbled 2% to a 4-month low of 7,185.
In addition, investors might want to pay attention to the Australian Bureau of Statistics’s (ABS) latest new loan commitments data.
Last Friday, the ABS revealed that new loan commitments, from a month-on-month perspective, declined 4.3% for housing and 2.5% for personal fixed term loans.
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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.