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Posted: September 24th, 2022

What is meant by “buy back 5% of its shares in the open market”

At its annual general meeting, a company (in which you are a shareholder) announcedthat it intends to buy back 5% of its shares in the open market. Its share price iscurrently £2 and its net asset value per share is £1.50.(i) What is meant by “buy back 5% of its shares in the open market”, and whatother methods of buying back shares are available to the company?(ii) List three reasons why a company might buy back its own shares.(iii) Describe the effect that buying back shares will have on the company’s net assetvalue per share.(iv) State with justification what you think will happen to the company’s share price.

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