Hi there,
I have come across a subsidiary that is repurchasing its own shares out of its own capital from its sole shareholder.
Other than for some tax purpose which I am not aware of; I fail to see the point in doing so.
Can somebody shed light on the situation?
Many thanks
Just a quick thought. This would serve to make available more cash to the parent and improve the parents liquidity.
What is actually happening is that the parent company is buying more alloted shares in cash and then a couple of months later the subsidiary is repurchasing these shares back, using the cash which was given to them in the first instance by the parent....weird
The textbook answer for public companies is that repurchasing generates interest in the stock and drives the price higher. In addition, repurchasing shares is done when a company wants to go private again. This was done by Ford (or his son?) back in the 40's.
However, the company you mentioned is probably private already and just wants to buy out a shareholder.
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