STU - Steel & Tube Holdings

[SailorRob]

No need to involve Warren Buffett in this debate. Berkshire Hathaway is, naturally, managed to maximise its return to its biggest shareholders.

The most incorrect statement I have ever read in my life. Offensive in fact.

The most small shareholder friendly company in the world.

[SailorRob]

Good point.

So if the company pays out excess capital to shareholders as a dividend then all of them will have to pay tax on that dividend. Some will pay tax at different rates but for most it will be at 30 or 33 cents on the dollar, turning $1 of dividends into 70 or 67 cents. So you've just taken a perfectly good dollar that you own as a shareholder and realised a 33% loss on that capital instantly.

Instead that WHOLE dollar could be used to buy shares in a pretty decent business and thus a share of all future earnings not to mention a share of the assets which will include the leftover cash, at a 33 to 50% discount. Essentially that's what's happening. They're using the companies money to buy shares for you. Or concentrate your ownership, so if you work out your ownership of the company before and after the repurchase you will now own more of the company.

The math all depends on the discount to intrinsic value the shares are repurchased at, and this is not a fixed number and will change somewhat due to future performance, but the returns could well be 10 x higher vs the dividend depending what happens in future.

And I guess this is why some want a dividend in the hand rather than 2 in the bush. But a Dividend now immediately destroys value and a repurchase below intrinsic immediately increases value.

Buybacks at higher than intrinsic value will destroy value, and this is what most companies do unfortunately.

Cheers

[winner69]

Good point.

So if the company pays out excess capital to shareholders as a dividend then all of them will have to pay tax on that dividend. Some will pay tax at different rates but for most it will be at 30 or 33 cents on the dollar, turning $1 of dividends into 70 or 67 cents. So you've just taken a perfectly good dollar that you own as a shareholder and realised a 33% loss on that capital instantly.

Instead that WHOLE dollar could be used to buy shares in a pretty decent business and thus a share of all future earnings not to mention a share of the assets which will include the leftover cash, at a 33 to 50% discount. Essentially that's what's happening. They're using the companies money to buy shares for you. Or concentrate your ownership, so if you work out your ownership of the company before and after the repurchase you will now own more of the company.

The math all depends on the discount to intrinsic value the shares are repurchased at, and this is not a fixed number and will change somewhat due to future performance, but the returns could well be 10 x higher vs the dividend depending what happens in future.

And I guess this is why some want a dividend in the hand rather than 2 in the bush. But a Dividend now immediately destroys value and a repurchase below intrinsic immediately increases value.

Buybacks at higher than intrinsic value will destroy value, and this is what most companies do unfortunately.

Cheers

Be a bit of a bugger if they decided the spare cash better off in shareholders hands and did a pro-rata buyback (like Tilt did)

If so in theory EPS etc would increase and share price go up eh so all hunky dory

[SailorRob]

Be a bit of a bugger if they decided the spare cash better off in shareholders hands and did a pro-rata buyback (like Tilt did)

If so in theory EPS etc would increase and share price go up eh so all hunky dory

Yeah you're absolutely right, would be a bugger but not the end of the world, you'd have the option to use the cash to buy more shares I guess, or not to sell in the first place.

The biggest danger to us all is that they try and spend it on something other than dividends or buy backs, if they do there is a virtual certainty that they will destroy value.

[nztx]

Yeah you're absolutely right, would be a bugger but not the end of the world, you'd have the option to use the cash to buy more shares I guess, or not to sell in the first place.

The biggest danger to us all is that they try and spend it on something other than dividends or buy backs, if they do there is a virtual certainty that they will destroy value.

Goodness .. now what does STU's past history tell us about this ?

More of the same repeated & all the eager holders may end up with a large CAP RAISE instead to then try to fix the job again ..

[Poet]

Yes this is definitely a company that should be prey, not predator

[nztx]

It would be real good if Fletcher's got interested in this curious kettle of fish again ..

No-one would care about a Div, buyback or any other distractions then ..

[Greekwatchdog]

I hope not. The board more or less told them to F**K Off when they came in at $1.95. Commerce Commission will also have a say.

[nztx]

I hope not. The board more or less told them to F**K Off when they came in at $1.95. Commerce Commission will also have a say.

but then the Board would have to up their game to pull a whole line of rabbits out of the hat & deliver ..

probably exactly what shareholders could have hoped the Doctor would have ordered too (Part II)

[Greekwatchdog]

STU have under delivered for so long. I am surprised shareholders allowed the Chair to stay. It won't happen and like you say the "Board"' had better deliver. Shareholders deserve that much