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I intend participating in the Buy-Back Tender for shares purchased before 19 August 2016 (the Buy-Back Tender Record Date). In addition, I purchased some additional Telstra shares after the Buy-Back Tender Record Date which are not eligible for the buy back. I am also considering buying some additional Telstra shares and wonder what effect the buy- back itself is likely to have on the price of Telstra share following the tender closing date of 30 September 2016. Can you help on the likely effect?
A: A good question and hard to estimate.
In the long term, the buyback will reduce Telstra’s share capital by about 2% – so potentially, may lead to a very marginal increase in earnings per share and perhaps even the dividend.
Short term share price – it can’t be a negative, and maybe some shareholders will look to buy their shares back. Unlikely that shareholders will pay a higher price, so it may put a floor on Telstra’s share price for a little time. Bottom line – I don’t think the impact will be that material.
